THE 

STORY  OF  A  BANK 


An  Account  of  the  Fortunes  and  Misfortunes 

of   the    Second    Bank    of  the    United 

States,  with  a  preliminary  Sketch 

of  the  First  Bank 


WILLIAM  HORACE  BROWN 

Including  an  Introduction  by 
GEORGE  E.  ROBERTS 

Director  of  the  United  States  Mint 


RICHARD  G.  BADGER 

THE   GORHAM    PRESS 
BOSTON 


Copyright  1912  by  Richard  G.  Badger 
All  rights  reserved 


The  Gorham  Press,  Boston,  U.  S.  A. 


THE  STORY  OF  A  BANK 


2003155 


INTRODUCTION 
BY  GEORGE  E.  ROBERTS 

THE  agitation  now  going  on  in  the  United 
States  for  important  changes  in  the  bank- 
ing and  currency  system  gives  especial 
interest  at  this  time  to  a  study  of  our  early 
financial  history.     It  is  instructive  to  know  when 
and  how  we  were  switched  off  the  course  followed 
by  nearly  all  other  countries  in  their  banking  develop- 
ment, and  how  our  system  differs  in  organization 
and  efficiency  from  the  systems  of  other  countries. 

When  Alexander  Hamilton  faced  the  problem  of 
providing  the  young  republic  with  a  currency  system, 
and  also  with  a  fiscal  agency  that  would  be  a  right 
arm  to  the  Treasury,  he  naturally  turned  for  a  model 
to  the  Bank  of  England  which  had  demonstrated 
the  usefulness  of  a  great  bank  of  issue,  both  to  the 
government  and  to  the  public.  Since  then  all  of  the 
other  countries  of  Europe,  one  by  one,  have  followed 
Hamilton  in  the  establishment  of  similar  institutions. 
They  differ  in  some  details  of  organization  and 
policy,  but  the  general  scheme  of  a  great  banking 
institution,  handling  all  of  the  financial  transactions 
of  the  government,  serving  as  a  correlating  link 
V 


VI  INTRODUCTION 

between  the  Treasury  and  the  banking  and  business 
community,  and  supplying  in  its  notes  the  paper 
currency  of  the  country,  has  won  its  way  from 
country  to  country  on  its  practical  merits,  until  it 
has  been  adopted  almost  everywhere. 

In  the  exercise  of  the  functions  referred  to,  these 
institutions  act  as  government  agencies,  performing 
public  services  which  Treasury  officials  by  the  very 
limitations  of  their  positions  are  unable  to  perform 
so  well.  It  is  the  general  banking  relations  which 
these  institutions  hold  with  the  public,  and  with  the 
banking  systems  of  their  countries,  that  enable  them 
to  discharge  these  functions  with  superior  efficiency, 
but  these  relations  afforded  the  basis  for  an  attack 
upon  Hamilton's  plan  on  constitutional  grounds. 
Congress  had  no  authority,  it  was  urged,  to  charter 
a  bank  to  carry  on  a  banking  business.  This  was 
the  principal  argument  against  the  first  bank  of  the 
United  States.  The  proposal  carried,  however,  and 
the  bank  was  chartered  for  twenty  years.  When 
the  charter  expired  in  1811,  Hamilton  was  dead, 
and  the  Federalist  party  had  gone  out  of  power. 
Albert  Gallatin,  Secretary  of  the  Treasury,  and  the 
ablest  financier  of  the  time,  although  wholly  out  of 
sympathy  with  Hamilton's  political  views,  recog- 
nized the  usefulness  of  the  Bank  and  earnestly 
advocated  a  new  charter,  with  some  changes  in  the 
organization.  The  vote  on  the  charter  in  the  House 
was  65  to  64  in  favor  of  indefinite  postponement;  in 
the  Senate  it  was  a  tie  and  the  vice-president  cast 


INTRODUCTION  VII 

his  vote  against  the  Bank.  Five  years  of  disastrous 
experience  without  the  Bank  effected  such  a  change 
in  the  attitude  of  Congress  that  the  charter  for  the 
second  Bank  was  granted  in  1816  with  but  little 
serious  opposition. 

After  the  second  Bank  had  been  made  a  political 
issue  and  forced  out  of  existence,  the  custody  of 
public  funds  was  given  over  to  the  state  banks,  and 
their  notes  became  the  only  paper  currency.  They 
soon  afterward  suspended  specie  payments  and  many 
of  them  went  into  bankruptcy,  with  heavy  losses  to 
the  Treasury.  Resort  was  then  had  to  the  inde- 
pendent treasury  system,  since  maintained  with 
some  modifications.  Daniel  Webster  said  it  was 
modelled  after  the  treasury  of  Darius,  King  of 
Persia,  500  B.  C.,  the  theory  of  the  system  being 
that  the  government  should  collect  all  income  in 
cash  and  guard  the  cash  in  a  strong-box  until  it  was 
paid  out  in  the  regular  course  of  expenditures.  It 
is  needless  to  say  that  this  policy  was  totally  at 
variance  with  modern  customs  and  at  times  proved 
to  be  wholly  impracticable. 

The  paper  currency,  issued  entirely  by  state  and 
private  banks,  without  any  supervision  by  the 
national  government,  soon  fell  into  a  deplorable 
state  of  disorder,  and  in  many  sections  remained  so 
until  the  national  banking  system  was  established 
in  1863.  The  leading  argument  for  the  national 
banking  system  was  that  it  would  provide  the 
country  with  a  uniform  and  safe  currency,  good  in 


VIII  INTRODUCTION 

all  sections.  Judge  Alphonzo  Taft,  father  of  William 
Howard  Taft,  writing  from  Cincinnati  to  Secretary 
Chase  of  the  pending  bill,  expressed  the  opinion  that 
if  Congress  would  adopt  his  recommendations  for  a 
national  currency,  "that  in  itself  would  be  no  incon- 
siderable compensation  for  the  War."  And  the 
fact  is  that  the  fulfillment  of  this  promise  as  to  the 
character  of  the  currency  has  so  fortified  the  national 
banking  system  in  the  confidence  of  the  public  that 
its  defects  have  been  disregarded. 

The  independent  treasury  system  proved  to  be  a 
serious  handicap  to  the  government  in  all  large 
financial  transactions.  So  long  as  income  and  outgo 
were  closely  balanced  the  inconvenience  was  not 
serious,  but  when  at  the  outbreak  of  the  Civil  War 
it  became  necessary  to  make  large  loans,  the  require- 
ment that  the  proceeds  should  be  transferred  physi- 
cally to  the  Treasury  became  an  almost  insuperable 
obstacle.  If  the  Treasury  could  have  accepted  bank 
credit  in  payment  for  bonds  and  drawn  against  this 
credit  in  making  payments,  it  is  probable  that  the 
greenbacks  need  never  have  been  issued,  that  the 
country  would  have  remained  on  a  specie  basis  and 
that  the  cost  of  the  war  would  have  been  very  much 
less.  The  country  was  rich  enough  to  buy  the  bonds, 
but  it  was  impracticable  to  pay  for  them  in  specie 
when  the  specie  was  to  be  withdrawn  from  the 
channels  of  trade  and  locked  up  in  the  Treasury. 
The  government  was  attempting  to  do  business  by  a 
method  which,  applied  to  all  payments,  would  bring 


INTRODUCTION  IX 

the  whole  civilized  world  to  a  standstill  at  any  time. 
A  similar  effect,  although  not  so  suddenly  produced, 
was  experienced  when  the  revenues  of  the  govern- 
ment for  any  considerable  period  ran  in  excess  of 
expenditures.  There  was  a  steady  drain  of  money 
out  of  current  use  into  an  idle  hoard  in  the  Treasury. 
An  enormous  economy  is  accomplished  in  the 
business  world  by  the  use  of  banking  machinery,  and 
it  is  highly  desirable  to  have  the  government  conform 
to  the  general  practice.  Its  receipts  and  disburse- 
ments are  so  large  that  unless  they  are  handled  in  the 
usual  manner  they  may  at  times  seriously  disturb 
the  money  market.  The  authors  of  the  national 
bank  act  recognized  this  by  providing  that  national 
banks  might  be  used  by  the  Treasury  as  depositories 
or  fiscal  agents.  The  Secretary  of  the  Treasury  may 
now  deposit  surplus  funds  in  national  banks,  thus 
returning  them  to  commercial  use,  but  he  is  not 
allowed  to  keep  disbursing  accounts  in  banks  in  any 
city  where  there  is  an  office  of  the  Treasury,  and  as 
there  are  offices  in  ten  of  the  principal  cities  of  the 
country  this  is  a  serious  limitation  upon  the  use  of 
banking  facilities.  During  the  suspension  of  cash 
payments  by  the  banks  in  1907  it  was  difficult  for 
the  public  to  obtain  money  for  payments  to  the 
Treasury  and  the  public  revenues  fell  off  rapidly  in 
consequence.  The  Treasury  was  nearly  empty  of 
cash;  it  had  $250,000,000  in  banks  but  hesitated  to 
call  for  any  part  of  it  in  cash,  for  fear  of  increasing 
the  popular  alarm.  If  the  Treasury  could  have 


X  INTRODUCTION 

received  cheques  on  solvent  banks  (as  has  since 
been  authorized)  and  made  its  own  payments  by 
drawing  cheques  on  the  same  banks,  the  Treasury 
would  not  have  been  a  disturbing  factor  in  that 
situation,  as  it  was. 

There  are  obvious  difficulties  about  having  the 
Treasury  use  seven  thousand  banks  as  depositories 
instead  of  one  large  institution.  It  is  impracticable 
to  use  all  local  banks  and  experience  has  shown  that 
it  is  impossible  to  prefer  some  over  others  without 
causing  complaints  of  favoritism.  The  fact  is  that 
the  Secretary  of  the  Treasury  is  subjected  to  con- 
stant importunity  from  banks  and  the  influential 
friends  of  banks,  asking  for  favors  of  this  kind.  In 
the  hands  of  an  unscrupulous  administration,  the 
distribution  of  Treasury  deposits  might  easily  be- 
come a  national  scandal. 

But  the  chief  defect  in  the  National  Banking 
system,  contrary  to  popular  opinion,  is  in  its  note- 
issuing  machinery.  The  objection  is  not  that  the 
notes  in  themselves  are  a  poor  currency,  but  that 
the  conditions  under  which  they  are  issued  are  so 
arbitrary  that  the  system  is  not  responsive,  or  in  any 
respect  related,  to  the  needs  of  the  country.  It  is 
related  to  nothing  but  the  public  debt.  If  we 
should  have  a  period  of  peace  and  prosperity  and 
want  to  pay  off  the  debt,  that  policy  would  involve 
the  retirement  of  the  entire  volume  of  bank  currency. 
The  only  element  in  our  monetary  stock  that  is 
responsive  to  the  changing  needs  of  the  business 


INTRODUCTION  XI 

community  is  gold.  The  only  way  the  business 
community  can  provide  itself  with  a  larger  supply  of 
money  is  by  the  importation  or  production  of  gold. 
The  needs  of  the  country  for  an  authorized  currency 
are  growing  and  variable.  They  vary  from  year 
to  year,  with  the  seasons  of  the  year,  and  with  the 
volume  of  trade.  Nobody  can  foretell  the  demands 
for  currency,  but  it  is  of  the  highest  importance  that 
there  shall  exist  somewhere  the  power  to  issue  all 
that  may  be  legitimately  wanted.  A  country  where 
that  power  exists  is  immune  from  bank  panics, 
while  a  country  without  such  a  system  is  never  safe 
from  them.  The  banks  of  the  United  States  hold 
over  $16,000,000,000  of  bank  deposits,  practically  all 
payable  on  demand,  but  there  is  only  about  $3,500,- 
000,000  of  money  in  the  United  States,  all  told,  in 
the  banks  and  out.  These  figures  should  be  enough 
to  convince  the  most  skeptical  that  some  means 
should  exist  for  providing  an  additional  supply  of 
lawful  money  when  it  may  be  called  for. 

The  national  banking  system  is  wanting  in  organi- 
zation. It  is  a  "system"  only  in  the  sense  that  the 
individual  banks  are  organized  and  operated  under 
one  general  statute,  subject  to  supervision  by  the 
same  public  officials.  There  is  little  provision  for 
relationship  between  the  units  and  no  agency  through 
which  the  Treasury  may  deal  at  once  with  them  all. 
The  currency  provisions,  as  we  have  seen,  are  so 
foreign  to  commercial  banking  as  to  be  quite  inade- 
quate to  serve  the  needs  of  the  country. 


XII  INTRODUCTION 

But,  although  the  policy  toward  the  United 
States  Bank,  which  is  the  subject  of  this  review,  was 
a  grave  mistake  at  the  time  and  entailed  great  losses 
upon  the  country,  and  although  the  national  banking 
system  has  serious  defects,  it  does  not  follow  that 
the  United  States  Bank,  if  it  had  survived  the 
attacks  of  Jackson,  would  have  proved  equal  to  all 
that  is  required  of  a  national  banking  system  for  a 
country  of  such  vast  extent  and  interest  as  the 
United  States.  At  best  it  could  only  have  served  as 
the  keystone  of  the  structure  and,  with  the  enormous 
development  of  banking  that  has  followed,  it  could 
hardly  have  maintained  its  dominant  position, 
or  fully  answered  to  the  requirements  of  that  posi- 
tion without  important  changes  in  its  constitution. 
It  would  have  had  to  become  more  ultimately  re- 
lated with  the  local  banks  of  the  country  and  more  dis- 
tinctly a  public  institution.  The  line  of  development 
which  banking  has  followed  in  this  country,  by  which 
every  community  has  been  supplied  with  thoroughly 
local  banking  institutions,  in  which,  as  a  rule,  the 
most  substantial  people  of  the  neighborhood  are 
interested,  is  in  many  respects  highly  satisfactory. 
Whatever  the  weakness  of  the  system  may  be,  it  has 
the  merit  of  bringing  the  banking  service  more 
closely  home  to  the  people  than  any  branch  banking 
system  could,  and  it  may  be  accepted  as  settled 
that  the  banking  business  of  this  country  will  always 
be  done  with  the  public  through  locally-owned 
institutions.  The  problem  of  those  who  desire  to 


INTRODUCTION  XIII 

strengthen  the  system  is  to  combine  with  this 
feature  of  independent  local  ownership  certain  powers 
which  will  enable  the  system  as  a  whole  to  protect 
any  of  its  individual  parts,  and  to  manage  all  of 
those  public  functions  which  the  experience  of  the 
world  has  shown  can  be  most  capably  performed  by 
a  banking  agency.  They  desire  to  make  the  system 
something  more  than  an  aggregation  of  unrelated 
banks,  and  to  overcome  the  tendency  among  them 
to  pull  apart  and  act  solely  for  self  protection  in 
every  time  of  strain. 

Unfortunately,  whenever  an  attempt  is  made  to 
remedy  this  fundamental  weakness,  the  same  old 
antagonism  must  be  met.  There  is  a  vague  and 
suspicious  fear  of  anything  like  organization  or  co- 
operation among  the  banks.  The  public  knows  the 
disastrous  consequences  that  result  from  a  collapse 
of  bank  credit,  but  when  it  is  proposed  to  allow  the 
banks  to  co-operate  lawfully  for  mutual  support,  an 
alarm  is  given  that  a  bankers'  "trust"  is  proposed. 
A  considerable  number  of  people  apparently  prefer 
that  the  banking  system  shall  be  weak  rather  than 
strong,  because  they  fear  strength  will  be  misused. 
This  amounts  to  a  deliberate  choice  of  poor  and 
ineffective  methods  on  the  ground  that  the  American 
people  are  not  capable  of  using  or  controlling  more 
scientific  methods  which  are  in  use  and  giving  satis- 
faction elsewhere. 

Our  25,000  banks  cannot  stand  individually  and 
alone  in  a  crisis.  The  weakest  will  go  first,  but  as 


XIV  INTRODUCTION 

they  fail  the  public  alarm  will  increase  until  the 
strongest  are  closed,  unless  they  stand  together  in  a 
policy  which  now  involves  a  violation  of  law.  Un- 
less they  suspend  cash  payments  by  agreement  the 
entire  fabric  of  credit  will  be  wrecked,  and  surely 
nobody  can  accept  the  policy  of  suspension  at  will  as 
a  permanent  feature  of  banking  in  this  country. 

There  is  no  disguising  or  evading  the  issue.  Our 
entire  industrial  and  commercial  system  must  remain 
subject  to  these  recurring  periods  of  disorganization 
and  distress  or  our  banking  system  must  be  more 
closely  and  effectively  organized.  There  must  be  a 
central  authority  to  act  in  certain  matters  for  the 
whole  system.  This,  of  course,  means  a  degree  of 
centralization,  but  all  organization  involves  central- 
ization; the  very  purpose  of  organization  is  to  provide 
in  an  orderly  manner  for  leadership  and  authority 
and  to  determine  under  what  conditions  and  re- 
straints power  shall  be  exercised.  A  tendency  to 
centralization  is  apparent  in  the  banking  business 
now,  a  movement  toward  voluntary  association  and 
consolidation,  and  it  will  go  on  under  our  present 
banking  laws  unless  the  support  and  protection  which 
the  individual  banks  are  seeking  may  be  secured  in 
some  other  way.  Is  it  better  that  this  movement 
should  go  on  or  that  a  degree  of  co-operation  shall 
be  provided  for  in  another  way?  Whatever  central- 
ization shall  occur,  under  a  general  plan  which  in- 
cludes all  of  the  banks,  will  be  public  in  character 
and  all  would  have  a  voice  in  its  control.  It  would 


INTRODUCTION  XV 

exist  in  a  delegation  of  authority,  in  part  from  the 
banks  and  in  part  from  the  government,  to  an  ad- 
ministrative body  for  specific  purposes,  with  ample 
supervisory  powers  reserved  to  the  government. 

All  of  the  institutions  of  society  rest  upon  a 
similar  basis.  There  can  be  no  industrial  or  social 
progress  without  organization,  and  as  population 
increases  and  presses  upon  the  natural  resources  it 
becomes  necessary,  not  only  that  organization  shall 
be  more  highly  developed,  but  that  it  shall  be  stable 
and  reliable.  In  a  sparsely  settled  country  where 
everybody  has  access  to  the  woods  and  the  soil, 
there  can  be  no  very  serious  industrial  crisis,  but  with 
a  dense  population  of  specialized  industrial  workers, 
dependent  upon  steady  employment  in  their  particu- 
lar industries,  any  interruption  in  the  flow  of  the 
exchanges  is  calamitous  in  results.  Nothing  is 
more  important  to  this  modern  industrial  organiza- 
tion than  the  protection  of  credit,  and  unless  the 
American  people  have  means  as  effective  to  that 
end  as  those  of  other  countries  they  will  be  under 
serious  disadvantage. 

In  any  plan  for  reorganizing  the  banking  system, 
the  local  banks  will  undoubtedly  be  left  free  to  con- 
duct their  ordinary  operations  in  their  own  way, 
subject  only  to  such  general  regulations  as  must 
always  be  enforced  for  the  common  good.  The 
business  will  still  be  open  to  all  who  wish  to  enter  it 
and  are  able  to  get  together  the  necessary  capital. 
The  conditions  do  not  favor  monopoly.  There  is  no 


XVI  INTRODUCTION 

control  of  nati*!** resources;  no  costly  equipment  is 
required;  the  amount  of  capital  necessary  can  be 
easily  raised  in  any  locality  and  if  the  business  is 
properly  conducted  can  be  readily  withdrawn  if 
desired. 

FThe  lending  power  of  the  banks  exists  for  the  most 
part  in  the  credits  left  with  them  by  their  customers, 
subject  to  withdrawal  at  their  pleasure.  It  is  a 
mistake  to  suppose  that  these  credits,  temporary 
and  shifting  as  they  usually  are,  may  be  used  by 
bankers  at  will.  Bank  patrons,  as  a  rule,  are  both 
depositors  and  borrowers  and  no  bank  can  hold  its 
business  unless  it  meets  their  legitimate  wants. 
One  class  of  customers  will  be  borrowing  in  one 
season,  other  classes  at  different  times,  and  the 
banker  adjusts  his  affairs  as  best  he  can  to  meet  all 
of  their  requirements.  The  degree  of  his  success  in 
satisfying  them,  at  the  same  time  maintaining  sound 
principles  of  banking,  is  the  measure  of  his  success 
as  a  banker.  His  business  grows  as  their  business 
grows  and  as  the  community  thrives.  The  more 
credits  they  accumulate  on  his  books  the  better  for 
him;  his  prosperity  is  indissolubly  linked  with  theirs. 
The  idea  that  the  bankers  of  any  locality  may  enter 
into  a  conspiracy  with  bankers  elsewhere  by  which 
their  own  locality  will  be  placed  at  a  disadvantage, 
or  that  bankers  as  a  class  may  conspire  against  the 
rest  of  the  community,  is  based  upon  a  total  mis- 
conception of  how  bankers  derive  profits  and  where 
their  interests  lie. 


INTRODUCTION  XVII 

This  book  treats  of  one  of  the  most  notable  con- 
troversies of  American  politics  and  the  story  is 
impressive  for  the  warning  it  gives  of  the  danger  in 
having  grave  and  intricate  economic  questions 
settled  by  the  kind  of  discussion  which  characterizes 
a  political  campaign.  As  population  increases  and 
becomes  more  and  more  highly  organized,  economic 
problems  will  multiply  and  government  will  have 
more  and  more  to  do  with  business1.  Questions 
vitally  affecting  the  progress  of  industry  and  the 
general  prosperity  will  be  frequently  before  the 
electorate.  Many  of  them  will  call  for  a  high  degree 
of  intelligence  and  practical  judgment,  some  of  them 
for  the  advice  of  experts,  and  all  must  be  approached 
in  a  spirit  of  inquiry  and  co-operation  if  they  are  to 
be  successfully  handled.  Unfortunately,  in  politics 
there  is  suspicion  and  antagonism  from  the  outset,  a 
grouping  into  hostile  camps,  and  a  rivalry  of  leader- 
ship that  make  a  fair  consideration  of  economic 
questions  at  present  impossible.  Political  discussion 
has  little  resemblance  to  economic  inquiry.  The 
latter  proceeds  by  analysis  and  patient  examination 
of  details;  the  former  deals  in  generalities  and  is 
nine-tenths  declamation  and  denunciation.  The 
clever  politician  finds  that  he  can  awaken  a  response 
more  readily  by  imputing  bad  motives  to  his  adver- 
saries, and  by  appealing  to  the  prejudices  and  pas- 
sions of  the  voters,  than  by  patient  discussion  of  the 
questions  before  them,  and  he  is  after  immediate 
results. 


XVIII  INTRODUCTION 

The  capacity  of  a  people  for  organization  and  co- 
operation develops  as  they  throw  off  these  influences. 
In  order  to  act  together  effectively  men  must  be  able 
to  depend  on  each  other,  and  that  implies  not  only 
mutual  esteem  and  confidence  but  recognition  of  a 
real  community  of  interests.  The  instinct  of  sus- 
picion and  antagonism,  the  fear  of  treachery  and 
conspiracies,  are  destructive  of  co-operative  effort. 
Society,  under  their  influence,  tends  to  disorganize 
and  lapse  back  into  the  primitive  state. 

The  instinct  of  suspicion  is  a  sign  and  survival  of 
an  early  period  of  the  race,  when  warfare  and  ex- 
ploitation was  the  common  business  of  mankind, 
before  men  had  learned,  first,  that  they  could  gain 
more  by  trading  with  a  neighbor  than  by  killing  him ; 
and,  second,  that  a  neighbor  was  worth  more  free 
and  prosperous  than  as  a  slave.  The  supreme  truth 
that  the  genuine  interests  of  men  are  not  conflicting 
but  harmonious  has  been  slowly  dawning  upon  the 
world  and  steadily  modifies  the  relations  between 
nations  and  classes,  but  even  now  is  only  faintly 
appreciated.  It  is  still  supposed  to  belong  to  some 
distant  idealistic  state,  although  every  year  sees 
new  recognition  of  it  in  practical  affairs.  The  rule 
is  general  and  fundamental;  the  exceptions  are 
personal  and  temporary.  It  is  still  true  that  one 
man  may  get  the  better  of  another  in  a  horse  trade, 
but  in  every  important  and  legitimate  sense  the  com- 
merce of  the  world  is  based  upon  mutual  benefits. 
The  interests  which  the  people  of  all  nations  and  all 


INTRODUCTION  XIX 

classes  have  in  common  are  so  much  more  import- 
ant than  those  which  conflict  that  they  constantly 
gain  with  enlightened  opinion.  It  is  not  very  many 
years  since  statesmen  of  world  renown  believed  that 
their  own  people  might  be  benefited  by  misfortunes 
which  befell  neighboring  countries,  but  the  inter- 
dependence of  the  modern  world  has  become  so 
apparent  that  no  one  of  repute  would  venture  that 
opinion  today. 

A  single  producer,  or  the  group  composing  a 
single  industry,  might  gain  a  price  advantage  at  the 
expense  of  consumers,  but  the  interest  of  producers 
as  a  class  cannot  be  separated  from  the  interests  of 
consumers  as  a  class,  because  everybody  belongs  to 
both  classes.  A  single  employer  may  have  an  im- 
mediate interest  in  keeping  down  the  wages  of  his 
own  employees  but  this  would  be  a  poor  country  for 
employers  as  a  class  if  all  employees  were  reduced 
to  starvation  wages.  A  single  "trust"  may  be 
interested  in  extortionate  prices,  or  a  single  capitalist 
in  usurious  returns,  but  any  general  combination  to 
curtail  the  purchasing  power  of  the  masses  would 
bring  factories  and  railways  to  a  standstill  and 
shrink  the  value  of  all  the  investments  in  the  United 
States.  Capital  in  the  mass  can  only  thrive  by  the 
prosperity  of  the  entire  population.  The  real  gams 
of  every  class  are  not  obtained  at  the  expense  of 
other  classes,  but  through  that  constant  progress  in 
the  arts  and  industries  by  which  the  sum  total  of 
wealth  is  increased.  When  this  essential  unity  of 


XX  INTRODUCTION 

interests  is  understood  there  will  be  no  more  such 
controversies  as  we  have  seen  in  this  country  over 
money  and  banking,  and  the  way  will  be  opened  for 
a  general  advance  along  all  lines  of  collective  and 
co-operative  effort. 

Washington,  May  1912. 


PREFACE 

THE  preparation  of  this  brief  history  of  the 
Bank  of  the  United  States  was  prompt- 
ed   by  the    feeling  that  the  remarkable 
events  which   it  covers   are  not  familiar 
to  as  many  of  the  average  readers  of  the  country, 
nor  to  the  large  class  of  busy  men  of  affairs,  as  they 
deserve  to  be.     This  is  believed  to  be  owing  to  the 
fact  that,  although  the  record  of  the  bank  is  given 
more  or  less  fully  in  the  general  histories  and  some 
works  on  finance,  it  has  with  one  exception  been  in 
separated  fragments,  and  scattered  through  several 
decades  of  our  history. 

The  purpose,  therefore,  is  to  present  in  concise 
form  a  connected  story-like  account  of  the  institution, 
with  just  sufficient  details  to  make  it  satisfactory  to 
the  ordinary  business  man  and  reader,  rather  than 
to  attempt  to  offer  any  new  material.  It  is  a  page 
of  history  so  unusual  in  its  several  phases  that  it  is 
considered  worth  putting  in  convenient  form,  so  that 
every  citizen  may  have  easy  access  to  it.  For  the 
purpose  of  completeness,  the  first  chapter  is  devoted 
to  a  sketch  of  the  first  Bank  of  the  United  States. 

The  great  Bank  was  for  years  the  very  heart  of  the 
American  financial  system.  Its  fortunes  were 

XXI 


XXII  PREFACE 

intricately  involved  with  both  the  financial  and 
political  life  of  the  nation.  It  is  of  a  period  more 
distinctly  marked  by  empiricism  and  partisan  rancor 
than  almost  any  other,  save  only  that  of  the  Civil 
War.  And,  besides,  the  results  were  of  such  tremen- 
dous consequences,  so  vitally  affecting  the  entire 
commonweal,  that  no  reader  is  likely  to  peruse  the 
simple  chronicle  of  it  without  feeling  the  force  of  the 
moral. 

We  have  not  yet  reached  perfection  in  our  fiscal 
system.  No  one  contends  that  we  have,  while  a  good 
many  among  those  whose  training  lend  weight  to  their 
opinions,  think  we  are  a  long  way  from  that  goal. 
There  is  a  smart  diversity  of  ideas,  now  as  always,  as 
to  what  changes  are  most  desirable  to  make  our  cur- 
rency system  more  adequate  to  the  demands  of  the 
nation.  A  central  bank  has  been  advocated  by  a 
number  of  sound  financiers,  but  they  are  not  a  unit 
as  to  the  exact  plan  on  which  it  should  be  erected; 
and  others  are  adverse  to  the  scheme  altogether. 
But  there  is  an  increasing  demand  for  a  change,  which 
has  renewed  interest  in  the  banking  and  currency 
systems  with  which  the  American  people  experi- 
mented in  the  past. 

The  Monetary  Commission  appointed  under  an 
Act  of  Congress,  and  which  has  been  studying  the 
banking  systems  of  the  world,  as  well  as  the  condi- 
tions and  peculiar  needs  of  the  business  of  this 
country,  is  confronted  not  only  with  a  most  difficult 
task,  requiring  the  highest  wisdom  and  knowledge, 


PREFACE  XXIII 

but  also  with  the  problem  of  overcoming  or  placating 
traditions  that  have  constantly  had  their  influence 
on  our  financial  legislation.  The  Reserve  Associa- 
tion plan  recommended  by  the  commission  is  sub- 
ject to  less  objection  than  a  central  bank,  although 
some  profess  to  foresee  danger  in  it.  The  situation 
is  one  of  extreme  gravity.  It  calls  for  the  steadiest 
judgment,  the  greatest  equanimity  of  the  busi- 
ness community,  and  the  least  emotionalism  by  the 
people  collectively.  Necessarily  there  will  be  much 
discussion,  and  a  keen  public  eye  for  special  theories; 
but  with  it  all,  the  wise  ones  are  aware  that  immense 
peril  lies  in  any  clamor  calculated  to  sway  mature 
judgment  based  on  experience  and  learning. 

This  consideration  also  had  something  to  do  with 
the  production  in  this  form  of  the  story  of  the  Bank. 
As  time  goes  on,  the  motives  that  impelled  its  mis- 
fortunes, and  the  policies  identical  therewith  that 
tended  to  lower  ideals  regarding  public  life,  are  more 
generally  reprobated,  and  it  is  hoped  the  recital 
may  tend  to  quicken  this  feeling. 

The  sources  of  this  volume  are  those  of  recognized 
authority.  The  material  was  gleaned  mainly  from  a 
few  standard  works,  the  reliability  of  which,  either 
as  to  facts  or  deductions,  has  been  fully  recognized. 
The  work  referred  to  in  the  first  paragraph  is  Catter- 
all's  History  of  the  Second  United  States  Bank, 
perhaps  the  most  searching  investigation  of  the 
subject  that  has  been  made;  but  this  is  a  volume  for 
students  rather  than  for  the  man  who  looks  askance 


XXIV  PREFACE 

on  a  technical  work  of  that  bulk.  Principal  among 
the  others  are:  Summer's  admirable  work,  Banking 
in  the  United  States,  being  the  first  volume  in  the 
great  symposium,  History  of  Banking  in  all  Nations; 
the  Documentary  History  of  the  United  States  Bank, 
including  a  record  of  all  the  legislation  relating  to  the 
bank  up  to  1832;  Schouler's  version  in  his  Constitu- 
tional History;  Knox's  History  of  Banking  in  the 
United  States,  and  a  few  lesser  works.  It  is  worthy 
of  remark  that  all  of  these  authorities,  with  others 
that  could  be  named,  arrive  at  the  same  opinion, 
varying  only  in  relation  to  minor  questions,  that 
there  was  no  reasonable  warrant  for  the  war  that 
was  made  on  the  Bank,  and  as  little  justification 
of  the  political  hostility  to  either  the  first  or  second 
Bank. 


Chicago,  May  1912 


THE  STORY  OF  A  BANK 


THE  STORY  OF  A  BANK 

CHAPTER  I 

THE  most  conspicuous  part  of  our  financial 
history  prior  to  the  Civil  War  is  that 
relating    to    the    second    United    States 
Bank.     It  is  a  story  of  dramatic  interest, 
containing  an  element  of  tragedy,  and  giving  an 
occasional  glimpse  of  farce-comedy.     Taken  in  con- 
nection with  a  brief  survey  of  the  methods  of  banking 
in  vogue  in  the  various  states  and  territories  at  the 
time,  and  a  few  preliminary  pages  on  the  first  bank, 
and  also  with  a  recollection  of  the  spirit  that  ruled 
and  moved  the  people,  there  is  hardly  a  more  instruc- 
tive chapter  in  any  department  of  American  history 
nor  one  the  lesson  of  which  is  worthy  of  wider 
application. 

The  first  United  States  Bank  was  happy  in  not 
making  so  much  history  as  the  second  of  that  name. 
It  is  well,  however,  to  remember  the  main  facts  about 
it,  as  they  lead  directly  to  the  larger  story.  It  was, 
like  the  second,  the  offspring  of  necessity — an  insti- 
tution organized  to  assist  in  bringing  order  out  of  the 
financial  chaos  that  existed  under  the  Confederation, 
and  as  an  aid  to  the  new -formed  Federal  Government 
in  conducting  its  fiscal  business.  There  was  so  much 
difficulty  in  conducting  the  financial  operations  of  the 
21 


22  THE  STORY  OF  A  BANK 

Government  that  the  national  credit  continued  to  lan- 
guish. Facilities  for  collecting  and  disbursing  the  pub- 
lic revenues  were  an  imperative  need.  Private  credit 
was  in  as  sad  a  state  as  that  of  the  nation,  punctuality 
in  payments  was  something  hardly  expected  by  any 
one,  and  the  ablest  minds  seem  to  have  agreed  that 
some  form  of  a  national  bank  was  the  only  instrumen- 
tality through  which  improvement  was  possible. 
Hamilton  was  the  most  influential  if  not  the  first 
advocate  of  such  a  bank.  His  first  ideas  were  embod- 
ied in  a  paper  to  Robert  Morris  under  date  of  April 
30,  1781,  while  the  War  was  yet  going  on.  His  plan 
would  have  made  the  United  States  and  the  States 
partners  in  the  shares,  both  being  permitted  to  own 
the  stock,  but  not  for  more  than  one-half  the  total 
capital.  One  of  his  ideas  was  to  make  it  a  land- 
speculating  bank,  at  least  to  give  it  power  to  buy 
and  sell  land.  The  author  of  the  project  believed 
there  would  be  rare  opportunities  for  profits  in  this 
way,  as  there  would  be  a  large  number  of  Tories 
who,  for  obvious  reasons,  would  emigrate  after  the 
close  of  the  war,  and  be  under  the  necessity  of  selling 
at  any  price.  Morris  did  not  give  this  part  of  the 
outline  his  approval,  although  he  and  Hamilton  and 
Governeur  Morris  had  many  ideas  in  common  as  to 
what  a  national  bank  should  be.  Some  three  years 
later,  Hamilton  opposed  a  scheme  to  found  a  bank  of 
the  state  of  New  York,  subscribers  to  the  shares  of 
which  were  to  be  permitted  to  pay  one-third  in  cash 
and  two-thirds  in  mortgages  on  land  in  New  York  and 


THE  STORY  OF  A  BANK  23 

New  Jersey  at  not  more  than  two-thirds  of  its  value. 
A  bank  was  organized  which  became  the  Bank  of 
New  York,  and  which  began  business  before  securing 
its  charter.  It  is  illustrative  of  the  business  condi- 
tions and  the  temper  of  the  times,  that  this  bank  had 
difficulty  in  getting  a  charter,  because  of  its  great 
unpopularity  growing  out  of  its  endeavor  to  enforce 
some  punctuality  in  dealings  with  it. 

Hamilton's  celebrated  paper  to  Congress,  Decem- 
ber 13, 1790,  gave  the  outline  on  which  the  first  Bank 
of  the  United  States  was  organized.  This  paper  has 
been  considered  by  some  as  the  acme  of  financial 
wisdom,  while  by  others  it  has  been  criticised  as  a 
jumble  of  good  and  bad  ideas,  his  approval  of  paper 
issues  two  or  three  times  in  excess  of  its  specie  basis 
being  regarded  as  the  encouragement  of  a  dangerous 
heresy,  although  his  idea  was  to  limit  it  to  a  Federal 
bank.  He  distrusted  State  issues.  But  on  other 
points  he  did  not  err.  He  pointed  out  the  advantages 
to  the  people  of  a  sound  bank  of  deposit,  where  small 
sums  of  many  depositers  having  no  immediate  use 
for  them  would  make  up  a  fund  that  would  be 
available  for  borrowers  who  could  make  profitable 
use  of  the  money.  Among  his  arguments  for  a 
national  bank,  Hamilton  said  that  it  would  be  able 
to  make  loans  to  the  Government  in  times  of  financial 
stringency,  and  that  its  operations  would  assist 
taxpayers  to  pay  their  taxes,  besides  cultivating 
punctuality.  He  declared  against  two  schemes  that 
were  already  becoming  prevalent  and  which  grew 


24  THE  STORY  OF  A  BANK 

into  pet  devices  throughout  the  country,  one  being 
paper  issues  on  land  security,  and  the  other,  banking 
by  a  State  for  profit  with  the  view  of  providing  for 
public  improvements  without  taxation. 

In  spite  of  the  extreme  necessities  of  the  situation, 
Congress  at  once  began  to  wrangle  over  the  plan. 
The  mere  historic  fact  is  not  of  much  consequence 
except  that  it  shows  the  critics  and  objectors  arguing 
most  hotly  on  questions,  not  whether  the  proposed 
bank  would  be  safe  and  helpful,  not  whether  it  would 
strengthen  public  and  private  credit,  not  whether 
it  was  the  best  that  could  be  devised.  On  the 
contrary,  the  debate  turned  on  questions  springing 
from  prejudice  and  social  and  sectional  antagonisms. 
The  opposition  professed  a  dread  of  the  growing 
money  power,  and  held  that  a  great  bank  was  not  in 
harmony  with  the  doctrine  of  equality,  as  it  would 
benefit  only  the  rich.  Then,  too,  it  would  benefit 
the  cities  at  the  expense  of  the  agricultural  sections; 
and  in  this  was  the  germ  of  the  argument  against 
the  constitutionality  of  the  measure,  as  the  real 
animus  lay  in  the  assumption  that  the  Bank  would 
symbolize  Federal  sovereignty  as  against  that  of  the 
States. 

It  may  fairly  be  said  that  from  this  time  was 
formulated  the  issues  on  which  grew  the  warfare 
between  the  conservative  class  and  the  masses, 
between  those  who  have  nothing  or  little  and  those 
who  have  more, — the  fear  and  hatred  of  vested 
interests.  Advocating  equality  and  the  noisy  denun- 


THE  STORY  OF  A  BANK  25 

elation  of  social  rank,  bred  the  most  bitter  class 
hatred,  which  became  a  political  shiboleth,  and 
which  has  been  at  the  bottom  of  most  of  the  errors 
and  evils  of  American  financial  legislation. 

It  did  not  seem  to  occur  to  those  who  declared  the 
Bank  would  benefit  only  capitalists  that  almost 
everybody  was  seeking  to  borrow  to  conduct  business, 
to  develop  industries,  to  improve  lands,  to  make  for 
themselves  profits  and  to  furnish  employment.  They 
professed  to  see  only  danger  in  men  being  able  to 
improve  a  condition — otherwise  almost  hopeless — 
by  securing  credit, — provided  they  secured  it  from 
the  rich,  that  is,  the  only  ones  who  had  to  lend. 
Hamilton  answered  the  objections  to  foreign  stock- 
holders, and  that  payment  of  dividends  to  them 
would  be  a  tax  on  the  community,  with  the  statement 
that  if  foreign  money  was  employed  by  citizens  it 
must  be  at  a  greater  profit  than  the  cost  in  dividends, 
and  therefore  it  was  a  gain  to  the  borrower. 

The  debates  on  the  Bank  foreshadowed  the  sec- 
tional antagonism  between  the  North  and  the  South. 
The  North  had  cities  and  commerce.  The  South 
had  its  agricultural  interests  and  partiality  for  State 
sovereignty,  while  the  States  were  not  to  be  per- 
mitted to  subscribe  for  the  shares  and  the  Federal 
Government  was. 

Madison  led  the  opposition  on  constitutional 
grounds,  his  high  card  being  the  fact  that  the  consti- 
tutional convention  had  voted  down  a  provision 
specifically  giving  Congress  the  power  to  incorporate. 


26  THE  STORY  OF  A  BANK 

This  continued  to  be  the  cornerstone  of  the  anti- 
Bank  constitutionalists  so  long  as  there  was  the 
shadow  of  a  national  bank  left  for  them  to  fight. 
The  Confederation  had  chartered  the  Bank  of  North 
America,  and  it  could  not  be  controverted  that  the 
new  Government  had  powers  equal  to  its  predecessor. 
This  was  one  of  the  readiest  arguments  in  favor  of 
the  Bank. 

The  charter  passed  the  House,  February  25,  1791, 
39  to  20,  to  run  for  twenty  years.  The  Bank  was  to 
be  located  at  Philadelphia.  It  was  to  issue  no  notes 
under  $10.  There  were  twenty -five  directors;  none 
could  be  foreigners;  seven  constituted  a  quorum. 
Only  stockholders  resident  in  the  United  States 
might  vote  by  proxy  (this  to  forestall  foreign  control). 
The  president  to  be  elected  by  the  directors.  Capital 
$10,000,000  in  shares  of  $400  each,  of  which  $8,000,- 
000  was  to  be  by  private  subscription  and  $2,000,000 
by  the  United  States,  no  private  subscriptions  to  be 
over  1000  shares.  The  bank  could  loan  the  Govern- 
ment not  over  $100,000  unless  by  act  of  Congress, 
nor  any  State  over  $50,000,  nor  any  foreign  potentate 
anything.  It  established  branches  at  New  York, 
Boston,  Baltimore,  Washington,  Norfolk,  Charles- 
ton, Savannah  and  New  Orleans.  It  was  to  report 
to  the  Secretary  of  the  Treasury  at  his  call,  but  not 
oftener  than  once  a  week,  and  that  official  might 
inspect  it  any  time.  The  Bank's  notes  were  receiva- 
ble for  dues  to  the  Treasury.  It  could  own  no  land 
or  buildings,  except  for  its  own  use,  or  by  foreclosure; 


THE  STORY  OF  A  BANK  27 

it  might  sell,  but  not  buy  public  stock;  its  interest 
rate  limited  to  six  per  cent.  It  should  be  noted  that, 
in  contrast  with  the  next  United  States  Bank,  it  paid 
no  bonus  to  the  Government.  This  was  Madison's 
second  objection. 

This,  the  first  Bank  of  the  United  States,  was 
modeled  largely  on  the  Bank  of  England.  Hamilton 
explained  the  object  of  the  Government  taking 
shares  was  to  aid  in  forming  a  specie  fund,  then  a 
difficult  thing  to  do;  but  it  has  been  shown  that  the 
Government  did  not  put  in  specie,  and  claimed  that 
its  subscription  gave  no  particular  advantage.  The 
shares  were  greatly  oversubscribed  in  two  hours 
after  the  subscription  opened,  and  the  Bank  began 
business  December  12, 1791.  The  subscriptions  were 
payable  in  four  instalments,  one-fourth  of  each  to 
be  in  gold  and  silver,but  it  was  said  that  no  more  than 
the  specie  part  of  the  first  instalment  ever  was  paid 
in  in  specie.  An  active  speculation  in  the  shares 
sprang  up,  and  is  said  to  have  contributed  to  the 
commerical  crisis  that  occurred  the  following  year. 
Recovery  was  rapid,  but  over-expansion,  caused  by 
many  local  banks  starting  up  and  issuing  notes  almost 
without  restriction,  culminated  in  another  panic  in 
1796,  the  year  of  the  great  financial  crisis  in  Europe, 
and  in  which  the  Bank  of  England  suspended  specie 
payments. 

The  Bank  and  its  branches  were  not  the  exclusive 
Government  depositories,  and  other  banks  success- 
fully competed  with  it  in  this  respect,  particularly 


28  THE  STORY  OF  A  BANK 

during  Jefferson's  Administration,  when  the  local 
banks  were  mostly  of  his  party.  In  January,  prior 
to  the  expiration  of  the  charter,  a  Treasury  report 
showed  one-third  of  the  Government  deposits  in 
eleven  State  banks,  only  three  of  which  were  west  of 
the  Alleghanies.  During  its  career  the  first  United 
States  Bank  was  controlled  by  Federalists.  This 
is  worth  bearing  in  mind.  It  explains  much  of  the 
opposition  to  the  renewal  of  its  charter;  as  the  fol- 
lowing extract  from  a  letter  of  Jefferson  to  Gallatin, 
his  Secretary  of  the  Treasury,  dated  July  12,  1803, 
shows  something  of  the  quality  of  patriotism  that 
animated  the  party  which  overthrew  the  Federalists, 
and  whose  slogan  was  simplicity  and  honesty  in 
government.  "As  to  the  patronage  of  the  republican 
(anti-Federalist)  bank  at  Providence,  I  am  decided- 
ly in  favor  of  making  all  the  banks  Republican  by 
sharing  the  deposits  amongst  them  according  to  the 
dispositions  they  show."  Whatever  ugly  methods 
for  making  party  adherents  this  seems  to  advise,  it 
had  the  merit  at  least  of  being  more  straight-spoken 
than  any  of  the  recorded  utterances  of  the  man  who 
destroyed  the  Second  Bank. 

There  is  no  evidence  that  the  Bank  did  not  well 
serve  the  purpose  for  which  it  was  created,  and  its 
operation  appears  to  have  aroused  few  complaints, 
even  among  the  faction  that  objected  to  its  charter. 
In  fact,  it  was  argued  that  when  Jefferson  signed  the 
bill  passed  by  Congress  to  enable  it  to  establish  a 
branch  at  New  Orleans  (in  the  newly  acquired  Terri- 


THE  STORY  OF  A  BANK  29 

tory),  he  and  his  followers  signified  that  their  scruples 
about  its  constitutionality  had  been  overcome. 

When  the  time  approached  for  the  Bank's  charter 
to  expire  March  4, 1811,  the  spirit  that  had  opposed  it 
was  aroused  anew.  At  the  time  the  Bank  was  orga- 
nized there  was  no  party  cleavage — political  parties 
had  not  yet  formed.  But  the  elements  of  popular 
distrust,  that  associated  capitalism  with  "British 
interests";  that  hated  centralization  of  Government, 
or  for  that  matter,  much  government  of  any  kind; 
that  were  jealous  of  Federal  power;  that  declaimed 
against  aristocracy,  and  professed  to  see  in  the  Bank 
and  its  adherents  a  menace  to  the  liberties  of  the 
people, — all  these  were  now  rallied  and  organized 
into  a  party,  and  that  party  was  dominant.  It  had 
taken  all  the  antagonisms  and  class  prejudices  and 
popular  notions  about  equality  and  liberty  and  made 
of  them  a  party  creed.  Its  principles  were  repugnant 
to  those  underlying  the  Bank,  and  it  was  never  for 
a  moment  a  question  of  whether  its  usefulness  and 
conduct  were  such  as  to  merit  a  renewal  of  its  charter. 
The  Secretary  of  the  Treasury  appealed  to  reason, 
by  showing  how  important  its  services  to  the  Govern- 
ment were  in  providing  a  safe  deposit  for  the  greatly 
increased  public  funds,  its  prompt  transmission  of 
them  to  and  from  all  points,  and  the  excellent  facil- 
ities it  afforded  for  collecting  the  revenues.  He  also 
declared  his  distrust  of  the  small  banks,  which  were 
now  numerous. 

But  Gallatin  was  whistling  against  the  wind.     The 


30  THE  STORY  OF  A  BANK 

contention  over  the  subject  became  acrimonious. 
Popular  feeling  was  largely  with  the  opposition. 
Its  chief  organ  was  the  "Aurora  "  which,  in  its  issue 
of  November  8,  1810,  offered  twenty  "reasons"  why 
the  Bank  should  not  be  rechartered.  The  one  most 
often  urged,  and  which  formed  the  pith  of  most  of 
the  others,  was  that  the  shares  were  mainly  owned  by 
foreigners.  Another  was  that  it  was  a  political 
engine,  designed  to  subvert  popular  government; 
that  it  was  in  the  service  of  England;  that  it  was 
creating  a  moneyed  interest  contrary  to  the  prin- 
ciples of  the  Declaration  of  Independence.  (Sumner) 

The  fact  that  foreign  shareholders  could  not  vote 
did  not  allay  this  dread,  nor  was  it  worth  while  to 
point  out  that  the  Declaration  did  not  enjoin  poverty. 
Those  who  have  made  the  most  searching  investiga- 
tions have  discovered  nothing  in  the  history  of  the 
Bank  to  warrant  the  violent  declamation  against  it. 
The  most  definite  charge  was  that  the  manager  of  the 
Charleston  branch  went  out  on  an  election  day  and 
threatened  to  curtail  discounts  of  those  voters 
"hostile  to  English  domination," — an  obvious  fabri- 
cation. Gallatin  was  even  denounced  as  a  traitor 
for  defending  the  Bank.  Duane  and  his  notorious 
newspaper  followed  the  idea  then  dear  to  the  people, 
that  in  mere  numbers  there  was  virtue — better  many 
small  banks  than  one  large  one;  and  land-banking 
was  especially  popular — "to  any  bank  not  founded  on 
landed  security  of  the  United  States  we  are  hostile." 

The  legislature  of  Virginia  instructed  their  senators 


THE  STORY  OF  A  BANK  31 

and  requested  their  representatives  to  vote  against 
renewal  because  it  was  unconstitutional,  "an  encroach- 
ment on  the  sovereignty  of  the  States."  Pennsyl- 
vania through  its  legislature  gave  similar  instructions. 
All  showed  deep  social  and  political  animosity,  and 
if  there  was  any  better  reason  we  have  the  word  of 
those  who  have  examined  the  records  closely,  that 
it  is  not  there  disclosed.  It  seems  strange  that  the 
question  of  its  utility  was  hardly  touched  upon. 
The  most  absurd  fears  were  alleged.  In  Congress 
it  was  urged  that  Napoleon  might  buy  up  the  shares 
and  so  control  America.  Another  thought  that  if  a 
war  with  England  should  come  the  prime  minister 
might  cripple  our  finances  by  English  holdings.  Yet 
no  foreign  stockholder  had  a  vote  in  the  management. 
Professor  Sumner  candidly  says,  "The  destruction  of 
the  Bank  was  a  part  of  the  program  of  the  young 
democrats  who  wanted  a  war  with  England  in  order 
to  conquer  Canada." 

As  a  matter  of  fact,  the  5,000  shares  of  stock  owned 
by  the  Government  were  sold  between  1796  and  1802, 
at  a  considerable  premium.  The  friends  of  the  Bank 
argued  that  it  was  really  no  longer  a  national  Bank, 
and  therefore  not  dangerous  in  any  way;  and  that  it 
would  disgrace  American  credit  not  to  grant  a  new 
charter  after  the  Government  had  unloaded  its 
stock  on  purchasers  abroad;  but  that  did  not  count 
in  Congress,  and  the  bill  to  recharter  failed.  The 
stock  was  liquidated  at  109 . 01^  for  $100  paid  in. 

The  skillful  management  of  the  Bank  is  attested  by 


32  THE  STORY  OF  A  BANK 

the  fact  that  the  average  loss  per  annum  by  bad  debts 
during  its  twenty  years  of  existence  was  but  61-100 
of  1  per  cent,  which,  considering  conditions  of  busi- 
ness at  that  time,  may  be  regarded  as  a  most  excellent 
showing.  The  dividends  averaged  something  over 
8  per  cent.  Between  March  and  September,  1811, 
the  Bank  paid  out  in  liquidation  $5,700,000  in  public 
and  private  deposits  and  redeemed  $3,500,000  of  its 
notes.  In  the  first  year  of  its  liquidation  it  paid 
out  $11,600,000,  and  its  specie  stock  increased 
$1,200,000.  We  have  Gallatin's  word  that  the  pub- 
lic deposits  were  removed  within  a  week  before  the 
expiration  of  the  charter  without  any  harmful  effect. 
In  1823  there  was  $205,000  of  its  notes  still  out, 
and  a  court  order  released  the  commissioners  from 
liability,  $5,000  being  reserved  for  mishaps. 

Was  it  really  anything  more  than  unreasoning 
prejudice  that  decreed  the  termination  of  the  first 
United  States  BankP  One  searches  through  the 
voluminous  record  of  the  speeches  and  debates  to 
discover  something  that  appears  to  justify  Congress 
in  its  refusal  to  renew  the  charter.  The  result  is  not 
satisfying.  The  arguments  that  appeal  to  common 
sense,  that  appear  in  consonance  with  sound  prin- 
ciples, were  made  by  advocates  of  the  Bank.  Those 
of  the  opposition  are  long,  flatulent,  revolving 
around  the  question  of  constitutionality,  and  reitera- 
ting the  dangers  of  fostering  a  moneyed  monopoly 
owned  largely  by  foreigners.  As  an  example  that 
should  have  been  a  valuable  lesson  at  a  later  date, 


THE  STORY  OP  A  BANK  33 

it  is  worth  while  to  look  closely  into  the  motives  that 
actuated  both  parties.  In  a  speech  in  support  of  the 
Bank,  Fisk  of  New  York  said : 

"Put  down  this  bank,  and  how  are  your  revenues 
to  be  collected?  Through  the  medium  of  the  State 
banks?  You  do  what  no  prudent  man  in  his  indi- 
vidual concerns  would  think  of  doing.  You  discard 
a  faithful,  honest,  responsible  agent,  whose  integrity 
and  fidelity  you  have  known  for  twenty  years  and 
you  place  your  estate  in  the  hands  and  at  the  disposal 
of  20  or  30  entire  strangers  of  whose  character  and 
responsibility  you  know  nothing,  nor  have  the  means 
of  acquiring  any  knowledge,  and  over  whose  conduct 
you  have  no  control.  Should  an  individual  act  thus 
with  his  property  he  would  be  deemed  to  have  lost  all 
regard  for  it,  if  not  considered  a  madman.  In 
resorting  to  the  State  banks  we  are  offering  the 
amount  of  our  revenue  as  a  bounty  for  intrigues, 
cabals,  and  factions,  throughout  the  country.  In 
almost  every  State  there  are  a  number  of  banks,  and 
each  will  endeavor  to  get  the  revenue  collected  in 
that  State  to  keep  and  trade  with.  It  must  be  given 
to  one  or  divided  among  them  all.  If  one  is  selected 
as  the  favorite,  all  the  rest  become  jealous,  dissatis- 
fied, and  exert  their  capital  and  influence  against  the 
favorite  bank  and  its  patron,  the  Government.  This 
will  awaken  the  spirit  of  faction  in  every  State,  yet 
unknown  in  this  country.  If  all  are  to  be  gratified  in 
their  request  for  the  deposits,  the  Government  must 
open  separate  accounts  with  all  the  different  banks 


34  THE  STORY  OF  A  BANK 

in  the  country,  to  the  amount  of  50  or  60,  and  new 
companies  will  be  formed,  and  new  applicants  will 
request  to  divide  the  business  and  share  the  profits. 
Indeed,  there  will  be  no  end  to  the  scene  of  specula- 
tion and  intrigue  which  will  soon  appear  if  this  course 
is  adopted  by  the  Government."  * 

Mr.  Fisk  estimated  that  the  cost  of  collecting  and 
distributing  the  public  funds  would  then  amount  to 
$600,000  a  year,  this  in  twenty  years,  the  term  for 
which  the  renewal  act  provided,  making  a  charge  on 
the  Government  of  $12,000,000.  The  Government 
had  a  gain  of  $721,000  besides  saving  this  enormous 
expense,  under  the  present  charter.  One  would 
think  this  was  practical  talk,  which  it  would  take 
strong  reasoning  to  overcome.  Yet  on  the  other 
hand  we  find  a  good  deal  of  this  sort,  the  quotation 
from  a  speech  by  Desha  of  Kentucky : 

"This  is  a  question  whether  we  will  foster  a  viper 
in  the  bosom  of  our  country  that  will  spread  its 
deadly  venom  over  the  land,  and  finally  affect  the 
vitals  of  our  republican  institutions;  or  whether  we 
will,  as  it  is  our  duty,  apply  the  proper  antidote  by  a 
refusal  to  renew  the  charter,  thereby  checking  the 
cankering  poison,  the  importation  and  dissemination 
of  foreign  influence  that  has  already  brought  our 

Government  to  the  brink  of  ruin It  would 

further  the  views  of  Federalism  by  increasing  their 
power  and  assist  them  in  overturning  the  present 


*Hist.  Doc.,  p.  154. 


THE  STORY  OF  A  BANK  35 

system  of  Government,  on  the  ruins  of  which  they 
will  count  upon  raising  one  more  congenial  to  their 
purposes." 

Yet  the  latter  argument,  if  so  it  may  be  called, 
prevailed  as  a  monument  to  the  statesmanship  of 
the  time;  and  Fisk's  prophesies  were  in  the  next  few 
years  verified  to  the  letter.  The  House  voted  Jan- 
uary 24,  1811,  to  postpone  indefinitely  the  renewal 
of  the  charter.  The  vote  in  the  Senate,  February  20, 
was  a  tie,  and  the  Vice-President,  George  Clinton, 
cast  the  deciding  vote  against  it. 


CHAPTER  II 

IT  was  not  long  after  the  closing  of  the  first 
Bank  until  the  country  began  to  experience 
again  the  distress  of  unsettled  financial  condi- 
tions. Where  there  had  been  fair  uniformity 
of  the  currency,  there  was  now  none.  Only  a  few  of 
the  local  banks  maintained  their  notes  at  par,  and 
the  notes  of  each  bank  were  at  a  different  rate  of 
discount.  It  was  well  known  that  only  the  notes 
of  the  Bank  of  the  United  States  had  been  current 
everywhere,  and  now  it  was  said  that  one  could  out- 
ride in  twenty-four  hours  the  credit  of  any  local  bank, 
which  meant,  of  course,  that  beyond  its  immediate 
neighborhood  its  issues  were  not  known,  and  there- 
fore distrusted.  "The  varieties  were  so  great  and  the 
badness  of  all  so  extreme,  that  there  was  no  money 
of  account.  The  Government  suffered  the  greatest 
loss  and  embarrassment  from  the  derangement  of 
the  currency . ' '  (Sumner) 

The  second  War  with  England  coming  on  had  some- 
thing to  do  with  increasing  the  trouble,  the  Govern- 
ment being  unprepared,  both  from  lack  of  income 
and  facilities  foi  disbursements,  to  meet  its  expenses. 
Before  its  close,  many  of  those  who  had  opposed 
the  renewal  of  the  charter  of  the  first  Bank  were 
36 


THE  STORY  OF  A  BANK  37 

favoring  the  creation  of  a  second  National  Bank. 
They  found  as  early  as  1813  that  their  claims  that 
the  fiscal  affairs  of  the  Government  could  be  carried 
on  just  as  well  by  the  local  banks  were  erroneous. 
Yet  whenever  any  definite  proposition  was  advanced 
in  Congress  it  aroused  the  old  political  antagonism 
and  only  the  most  embarrassing  necessities  made 
another  bank  possible. 

When  one  considers  party  antagonisms  at  this 
time,  and  in  connection  with  the  public  finances,  one 
of  the  causes  of  increasing  party  hostilities  is  seen 
in  the  attitude  and  actions  of  the  Federalists  in 
New  England.  That  their  opposition  to  the  second 
War  was  carried  to  the  extent  of  trying  to  cripple  the 
Government  in  its  finances,  there  can  be  little  doubt. 
Mathew  Carey  made  the  charge  that  the  Boston 
banks  entered  into  a  conspiracy  "to  stop  the  wheels 
of  Government  by  draining  the  banks  in  the  Middle 
and  Southern  States  of  their  specie,  thus  producing 
an  utter  disability  to  fill  the  loans"  needed  to  conduct 
the  war.  Carey  made  out  a  pretty  strong  case,  too, 
by  giving  specie  statistics;  not  only  that,  but  he  made 
a  telling  charge  that  specie  to  the  extent  of  seven  or 
eight  millions  was  drawn  into  the  British  Provinces 
to  pay  for  Government  bills  and  smuggled  goods. 
It  was  known  that  in  Boston,  men  of  means  not  only 
refrained  from  subscribing  to  the  Government  loans, 
but  the  loans  were  so  unpopular  that  advertisements 
were  placed  in  Boston  papers  promising  that  names 
of  subscribers  would  not  be  made  public. 


38  THE  STORY  OF  A  BANK 

Government  loans  had  sold  as  low  as  80,  and  at 
that  brought  a  various  assortment  of  bank-note 
currency,  depreciated  from  20  to  30  per  cent,  and  in 
some  instances  as  much  as  60  per  cent.  Some  of  the 
loans  were  downright  failures .  The  banks  suspended 
specie  payments  August  and  September,  1814,  and 
the  Government  had  to  take  any  sort  of  paper. 
Besides,  the  public  finances  had  been  poorly  managed. 
Albert  Gallatin,  an  able  Secretary  of  the  Treasury, 
resigned  under  popular  clamor,  and  in  1811  William 
Jones  became  Acting  Secretary  of  the  Treasury.  He 
was  entirely  unequal  to  the  task,  and  in  February, 
1814,  gave  way  to  George  W.  Campbell,  who  was 
equally  inefficient.  These  men  first  had  an  idea  that 
the  War  could  be  financed  from  the  ordinary  rev- 
enues with  the  help  of  Treasury  notes,  and  were  dis- 
appointed when  loans  were  not  subscribed  for  because 
they  were  unauthorized  by  Congress,  and  no  meas- 
ures taken  for  their  repayment.  When  A.  J.  Dallas 
succeeded  to  the  Treasury  portfolio  late  in  1814, 
the  Government  defaulted  on  interest  on  the  Nation- 
al debt,  held  in  New  England,  failed  to  redeem 
Treasury  notes  on  demand,  and  paid  soldiers  in  bank 
notes  which  were  of  so  doubtful  value  that  they  were 
not  receivable  for  taxes.  In  fact  the  Treasury  at 
one  time  was  unable  to  meet  payment  of  small 
current  bills.* 

Even  when  the  Treasury  had  money,it  was  difficult 


*Catterall,  p.  1  et  seq. 


THE  STORY  OF  A  BANK  39 

for  it  to  meet  its  disbursements  at  different  places. 
"One  of  the  chief  reasons  for  winding  up  the  old 
Bank  of  the  United  States  was  to  find  out  whether 
it  had  been  useful  or  not.  In  1815  it  was  almost 
universally  believed  that  this  question  had  been  fully 
answered  by  experience  and  that  the  experience  had 
been  costly,"  says  Sumner;  and  it  cannot  be  denied 
that  the  local  banks  had  failed  completely  as  fiscal 
agents  of  the  Government.  They  had  refused  to 
make  necessary  transfers,  had  failed  to  provide 
adequately  for  public  deposits,  and  finally  had  refused 
to  pay  the  balances  due  by  them  except  in  the  ordi- 
nary course  of  public  expenditures  at  the  place  in 
which  they  were  located.  The  reader  is  hardly 
likely  to  need  a  reminder  that  the  opposition  to  a 
national  bank  during  all  the  years  of  controversy 
over  the  subject,  from  the  first  agitation  for  the 
recharter  of  the  first  Bank  of  the  United  States  to  the 
final  overthrow  of  the  second,  was  strengthened  and 
encouraged  by  the  local  bank  interest.  As  will 
appear,  banks  under  State  charters  and  private 
banks  as  well,  viewed  the  national  institution  as  an 
unwarranted  restriction  on  the  license  which  they 
would  otherwise  enjoy  of  doing  business  practically 
as  they  pleased.  They  resented  the  regulation  which 
the  great  Bank  imposed  on  them,  their  favorite 
charge  being  that  it  was  a  "monster  monopoly," 
even  when  five  hundred  of  them  were  doing  business 
as  its  competitors,  and  in  reality  being  benefited  by 
its  steadying  power.  It  reduced  their  excessive 


40  THE  STORY  OF  A  BANK 

note  issues,  and  in  some  places  the  rate  of  interest — 
and  the  public  gained  thereby. 

But  above  all  they  had  the  feeling  strong  in  that 
era  that  any  corporation  that  enjoyed  any  special 
advantage  from  the  Government,  no  matter  what 
benefits  it  gave  in  return,  was  a  public  vampire;  and 
this  feeling  was  stronger  with  respect  to  the  Govern- 
ment funds  than  anything  else.  They  assumed  a 
natural  right  to  these  deposits,  and  never  allowed 
the  consideration  of  safety  or  convenience  to  the 
Government  to  count  against  the  benefits  which 
"the  people"  would  derive  from  the  use  of  the  public 
revenues. 

A  glance  at  the  record*  shows  that  it  required 
repeated  efforts  before  another  bank  was  chartered. 
January  4,  1814,  a  petition  signed  by  150  business 
men  of  New  York,  praying  that  an  act  be  passed  to 
incorporate  a  United  States  Bank  with  $30,000,000 
capital,  was  presented  in  the  House  by  Mr.  Leferts. 
It  was  referred  to  the  Committee  on  Ways  and  Means 
which  reported  that  Congress  had  no  power  to  pass 
such  an  act.  Calhoun  suggested  that  a  Bank  of  the 
United  States  within  the  District  of  Columbia  would 
be  as  useful  for  all  practical  purposes,  he  believed, 
as  any  other,  and  the  power  of  Congress  to  charter 
such  a  bank  could  not  be  doubted.  Taylor  of  the 
Ways  and  Means  Committee  reported  such  a  bill, 
providing  for  a  bank  with  a  capital  of  $30,000,000, 
but  it  failed  to  pass. 


*Doc.  Hist,  of  the  United  States  Bank 


THE  STORY  OF  A  BANK  41 

A  Southern  member  made  the  next  move  for  a 
national  bank,  Felix  Grundy  of  Tennessee  submitting 
a  resolution  for  one  April  2,  1814.  The  Committee 
failed  to  report  before  adjournment;  and  on  the 
reassembling  of  Congress  in  extra  session  in  Septem- 
ber, Fisk  of  New  York  presented  another  petition 
from  business  men  of  that  State,  praying  for  the 
establishment  of  a  Bank  of  the  United  States.  It 
went  to  the  Committee  on  Ways  and  Means,  which 
apparently  lost  sight  of  it,  for  it  returned  a  report  on 
the  Finances  of  the  Government  containing  five 
resolutions,  in  none  of  which  was  there  any  proposi- 
tion respecting  a  Bank.  Dallas,  now  Secretary  of 
the  Treasury,  recommended  the  establishment  of  a 
national  bank,  declaring  it  to  be  the  only  remedy  for 
the  shocking  condition  of  the  Government  finances. 
A  bill  after  the  Dallas  plan  was  drawn  up,  but  it 
was  strongly  opposed,  for  providing  that  the  Govern- 
ment might  suspend  specie  payments  whenever  it 
found  necessary — in  fact  it  was  a  scheme  for  a  non- 
specie  paying  bank.  A  plan  without  this  defect 
was  recommended  by  Calhoun,  and  substituted  for 
the  Dallas  bill,  but  there  was  so  much  disagreement 
that  it  failed.  The  House  blocked  the  proposal  by 
its  wrangling.  In  December,  1814,  theSenate  report- 
ed and  passed  a  bill  similar  to  that  recommended  by 
Dallas.  It  was  lost  in  the  House  by  the  casting  vote 
of  the  speaker,  Cheves.  Then  the  House  tried  again, 
and  passed  a  bill,  128  to  38,  providing  for  no  suspen- 
sion and  no  Government  partnership.  The  Senate 


42  THE  STORY  OF  A  BANK 

finally  acceded  to  it,  and  the  bill  went  to  the  President 
who  returned  it  with  a  veto,  because,  as  he  said, 
"such  a  Bank  cannot  be  relied  on  during  the  war  to 
provide  a  circulating  medium  or  loans  or  anticipation 
of  revenue."  In  this  he  appears  to  have  waived  the 
question  of  constitutionality. 

February  6,  1815,  another  bill  was  introduced  in 
the  Senate,  where  it  passed  February  15,  and  on  the 
17th  came  news  of  the  treaty  of  Ghent  which  ended 
the  war.  The  House  joined  in  the  general  exultation 
and  indefinitely  postponed  action  on  the  bill,  appar- 
ently assuming  that  the  financial  troubles  of  the  nation 
would  now  right  themselves,  which  Calhoun  at  the 
next  session  very  plainly  told  them  was  impossible, 
and  that  no  remedy  could  be  found  except  through  a 
national  bank.* 

In  his  message  for  1815  the  President  urged  Con- 
gress to  provide  for  a  uniform  currency,  either  by  a 
National  Bank  or  by  Government  issues.  In  response 
to  a  request  from  the  Committee  on  Currency, 
Dallas  gave  another  plan  for  a  Bank  which  he 
recommended,  at  the  same  time  arguing  for  its 
constitutionality.  It  did  not  arouse  the  objections 
of  the  previous  one.  Calhoun  reported  a  bfll  for  a 
charter  in  accordance  therewith,  January  8,  1816, 
and  gave  it  his  support.  It  passed  the  House  April 
10, 1816,  80  to  71,  and  afterwards  passed  the  Senate, 
22  to  12,  the  result  of  the  seventh  attempt  to  secure 
a  bank.  It  was  immediately  approved  by  the  Presi- 

*C*tter»lI,  p.  18 


THE  STORY  OF  A  BANK  43 

dent — .This  bill  wasopposed  by  the  Federalists^ 
headed  by  Webster,  who  objected  to  the  Government 
holding  stock  in  it,  and  also  to  the  size  of  the  capital. 

It  is  worthy  of  note  that  now  the  political  opposi- 
tion to  the  Bank  came  largely  from  the  Federalist 
element.  The  reasons  were  not  far  to  seek.  They  had 
opposed  the  war,  had  impeded  measures  necessary 
for  financing  it,  and  a  new  bank  if  established  would 
be  under  the  control  of  their  political  opponents. 
It  will  be  interesting,  however,  to  watch  the  uses  these 
opponents  made  of  their  opportunites  in  managing 
the  new  Bank,  and  to  contrast  the  results  of  the 
first  few  years  of  its  operations  with  the  record  of  the 
first  Bank. 

The  charter  of  the  second  United  States  Bank  was 
for  twenty  years,  with  a  capital  of  $35,000,000,  of 
which  $7,000,000  was  to  be  in  specie,  and  $7,000,000 
contributed  by  the  United  States  in  5%  stock, 
subscriptions  to  be  paid  in  three  installments.  The 
remaining  $21,000,000  of  public  subscriptions  was 
payable  in  Government  stock.*  It  was  to  pay  a 
bonus  to  the  Government  of  $1,500,000  in  three 
installments,  two,  three  and  four  years,  was  not  to 
issue  notes  under  $5,  and  not  to  suspend  specie  pay- 
ments under  penalty  of  12%.  There  were  to  be 
twenty  directors  chosen  by  the  stockholders,  and 
five  (stockholders)  appointed  by  the  President  of  the 
United  States.  No  person  might  subscribe  for  over 

*Probably  few  readers  fail  to  note  thatfthe'word  "bonds"  is 
now  generally  used  with  reference  to  Government  securities. 


44  THE  STORY  OF  A  BANK 

3,000  shares  unless  the  total  subscription  should  be 
less  than  $28,000,000.  The  Secretary  of  the  Treas- 
ury might  at  any  time  redeem  the  public  stocks  in 
the  capital  of  the  Bank  at  the  rates  at  which  it  was 
provided  they  should  be  received  in  subscriptions, 
namely:  6%  at  par,  3%  at  65,  7%  at  106.51  and 
accrued  interest.  He  might  also  redeem  the  5% 
stock  given  by  the  Government  for  its  subscription. 
The  directors  were  to  be  chosen  annually,  and  no 
one  of  them  might  be  a  director  in  any  other  bank. 
No  stockholder  not  residing  in  the  United  States 
might  vote  by  proxy.  Five  of  the  elected  directors 
and  one  of  the  appointed  directors  were  to  retire 
each  year,  and  no  director  could  serve  more  than 
three  years  out  of  four  except  the  president.  The 
Bank  was  prohibited  from  buying  public  stock,  and 
its  interest  rate  was  limited  to  6%.  It  might  not 
loan  the  United  States  more  than  $500,000,  or  any 
state  more  than  $50,000,  and  could  make  no  loans 
whatever  to  any  foreign  prince  or  state.  It  was 
bound  to  transfer  public  funds  from  place  to  place 
at  the  demand  of  the  Secretary  of  the  Treasury 
without  charge,  and  was  to  give  the  Secretary  reports 
of  its  condition  as  often  as  he  should  call  for  them, 
not  exceeding  once  a  week.  Congress  was  to  charter 
no  other  bank  during  the  period  of  this  charter.  It 
was  allowed  to  issue  post-notes  in  denominations 
of  not  less  than  $100,  having  not  more  than  sixty 
days  to  run.  The  directors  were  to  appoint  the 
officers  of  the  branches,  affix  their  compensation  and 


THE  STORY  OF  A  BANK  45 

establish  by-laws  for  them.  The  Bank  was  not 
allowed  to  pay  more  than  3/£  of  1%  for  deposits  of 
specie.  It  was  required  to  keep  in  separate  books 
accounts  of  the  Government,  and  the  total  amount 
of  its  debts  exclusive  of  cash  deposits  was  limited 
to  the  amount  of  its  capital  unless  Congress  should 
otherwise  allow.  Of  the  twenty  elected  directors, 
ten  were  Federalists  and  ten  Republicans,  but  no  such 
bi-partizanship  was  observed  by  the  President  in 
appointing  the  five  Government  directors,  all  of 
whom  were  named  from  his  own  party.  William 
Jones,  recently  Secretary  of  the  Navy,  and  the 
incompetent  Secretary  of  the  Treasury  pro  tempore, 
was  elected  president,  being  a  Republican  politician 
backed  by  Madison  and  Dallas. 

An  important  provision  of  the  charter  was  that 
governing  the  votes  of  the  stockholders.  One 
share  and  not  more  than  two  shares  had  one  vote; 
for  every  two  shares  above  two  and  not  above  ten, 
one  vote;  for  every  four  shares  above  ten  and  not 
exceeding  thirty,  one  vote;  for  every  six  shares  above 
thirty  and  not  exceeding  sixty,  one  vote;  for  every 
eight  shares  above  sixty  and  not  exceeding  one  hun- 
dred one  vote;  and  for  every  ten  shares  above  one 
hundred,  one  vote;  but  no  person,  co-partnership  or 
body  politic  could  cast  over  thirty  votes.  This  ar- 
rangement, intended  to  prevent  control  of  the  man- 
agement by  a  few,  left  a  large  loophole,  as  will  pres- 
ently be  seen,  for  much  harmful  manipulation. 

By  comparison  it  will  be  seen  that  exclusive  of  the 


46  THE  STORY  OF  A  BANK 

bonus  this  charter  did  not  depart  farfrom  that  of 


'the  first  Bank  organized  on  Hamilton  s  plan.  We 
finoTTT  hinted  that  this  was  one  of  the  objections 
urged  against  it— snmpthing  that  hart  r>een  furbished 
upjrom  theTSWalist.  scrap  heap.  BuUn^any^event^ 
the  administration  was  well  pleased  with  it.  While" 
Webster  had  headed  the  Federalist  wing  of  the  oppo- 
sition to  the  charter,  he  introduced  a  joint  resolution 
April  30,  1816,  requiring  that  after  the  20th  of  the 
succeeding  February  all  payments  to  the  United 
States  should  be  made  either  in  specie  "or  in  Treasury 
notes,  or  in  the  notes  of  the  Bank  of  the  United 
States,  or  in  notes  of  banks  payable  and  paid  on 
demand  in  specie;"  this  being  adopted.  It  was  the 
authority  bestowed  by  this  legislation  that  enabled 
the  Government  to  bring  the  necessary  pressure  to 
bear  on  the  local  banks  to  bring  about  a  resumption 
of  specie  payments,  which  those  banks  were  resisting. 
Subscriptions  to  the  stock  of  the  Bank  were  received 
at  various  points  July  1,  1816.  When  the  subscrip- 
tions were  opened  it  was  found  that  the  aggregate 
fell  short  of  the  $28,000,000  allotted  to  the  public  by 
the  sum  of  $3,038,300.  Stephen  Girard  immediately 
came  forward  and  took  the  whole  amount.  The 
bank  organized  November  1,  1816;  and  February 
20,  1817,  was  the  date  fixed  upon  by  the  Secretary 
of  the  Treasury  for  the  resumption  of  specie  payments 
which  had  long  been  suspended.  At  this  time  irre- 
deemable paper  currency  was  in  use  nearly  all  over 
Europe,  except  in  France,  and  its  depreciation  made 


THE  STORY  OF  A  BANK  47 

it  easier  now  to  draw  specie  to  America.  The 
Secretary  of  the  Treasury  was  able  in  1817,  to  redeem 
from  increased  revenues  $13,000,000  of  the  public 
debt.  But  at  the  same  time  the  Bank  became  credi- 
tor of  the  local  banks  for  the  large  amount  of  their 
notes  with  which  the  Secretary  made  payments. 
This  is  how  the  Bank  acquired  that  power  to  regulate 
the  currency  by  exerting  pressure  as  it  saw  fit  on  the 
State  banks,  and  for  exercising  which  in  a  needless 
degree  it  could  not  long  escape  censure.  It  could 
force  them  toward  a  resumption  of  specie  payments, 
which  after  all,  was  part  of  the  work  it  had  been 
incorporated  to  do.  But  it  was  nothing  new  for  the 
local  banks  to  cry  oppression — they  always  did  so 
whenever  their  reckless  and  even  lawless  methods 
were  interfered  with.  As  has  been  indicated,  it  was 
they,  more  than  any  others,  who  furnished  dema- 
gogues then  and  years  later  with  the  pretext  for  de- 
nouncing the  Bank  as  an  oppressor  of  the  people. 

Secretary  Dallas  had  proposed  resumption  of 
specie  payments  as  early  as  March,  1816,  but  the 
banks  resisted.  The  National  Bank  began  business 
the  following  month,  and  in  July,  Dallas  proposed 
that  specie  payments  begin  in  October,  first  with  all 
notes  smaller  than  $5.  The  banks  again  refused, 
and  wanted  till  July  1,  1817,  which  caused  a  good 
deal  of  apprehension  to  the  administration.  No 
doubt  the  local  banks  were  actuated  largely  by  their 
jealousy  of  their  new  competitor. 

When  W.  H.  Crawford  became  Secretary  of  the 


48  THE  STORY  OF  A  BANK 

Treasury,  October  22,  1816,  there  were  89  State 
banks  of  deposit  with  $11,000,000  in  them  of  United 
States  funds.  The  transfers  from  them,  previously 
noted,  took  from  the  Secretary  the  power,  after  a 
nominal  resumption  of  specie  payments,  to  reject 
the  notes  of  those  banks  which  pretended  to  pay  in 
specie.  Qawford  urged  the  local  banks  to  join  with 
the  Bank  of  the  United  States  in  efforts  toward 


resumption,  offering  to  dra"w  from  them  only^  gradur_ 
ally  and  not  in  favor  of  the  new  Bank.  Thqfmnpepof 
theflocal  bankjp  was  ^ggalu  51iuw5^in  ^geir rn51tnrt^ 
^rPfusaTj^^ateftd,  t.heyoallftd  a.  Bankers'  Convention 
in  August,  1816,  at  Philadelphia,  which  was  attended 
by  representatives  of  New  York,  Philadelphia  and 
Baltimore  banks,  who  coolly  rebuked  the  Secretary 
for  his  entirely  reasonable  request,  and  voted  a  non- 
approval  of  his  policy  of  resumption.  One  is  led 
to  wonder  what  would  have  happened  to  tneBank  of 
the  United  Slates IrTJackson's  time,  or  any  previous 
time,  if  it  had  shown  any  such  militant  opposition 
to  a  fair  and  reasonable  Government  policy.  But 
there  wasCpo  talk  of*  these  banks  trying  Tft  "fiiih'veFt- 
<the  Government,"  and  there  is  no  record  that  Jack- 
sonorany  of  his  adherents  ever  referred  to  this  action 
_as  tending  to  override  democratic  institutions  or 
interfere  with  established  governmental  power. 
frolessor  Sumner  says:  "Here  certainly  was  very 
dainty  action  with  regard  to  the  'removal  of  the 
deposits' ....  No  such  insubordination  was  ever_ 
manifested  by  either  Bank  of  the  United  States  as 


THE  STORY  OF  A  BANK  49 

characterized  the  State  banks  in  the  dealings  of  the 
Government  with  them"  at  this  period. 

The  banks  finally  submitted  an  agreement  as  to 
resumption,  which  was  sanctioned  by  the  Secretary, 
and  February  20,  1817,  was  the  date  fixed  upon. 
The  transfer  of  the  Government  funds  to  the  new 
Bank  caused  considerable  ill  nature  on  the  part  of 
the  local  banks.  As  has  been  indicated,  rarely  if 
ever  has  the  nation  been  in  a  more  chaotic  state  of 
finances,  than  it  was  at  the  close  of  the  second  War 
with  England.  Both  public  and  private  finances  were 
in  the  utmost  disorder.  There  had  been  inflation, 
speculation,  depression.  The  country  was  afflicted 
with  an  excess  of  banks — it  seemed  that  the  more 
there  were  of  them  the  worse  the  conditions. 

All  this  was  what  the  new  national  Bank  was  in- 
tended to  remedy,  and  it  went  about  it  much  like 
one  trying  to  extinguish  a  fire  with  oil.  Following 
the  financial  methods  of  the  day,  many  of  those  who 
assisted  in  its  organization,  who  bought  the  shares, 
and  some  of  whom  became  directors  and  otherwise 
concerned  in  the  management  of  it,  immediately 
set  about  a  system  of  operations  which  within  two 
years  plunged  it  into  the  financial  mire. 

Much  was  expected  of  the  Bank  on  all  sides,  for 
strgnV  claims  had  been  made  in  Congress  and  out, 
thai  it  would  prove  a  great  public  blessing  bjT 
making  a  uniform  currency^  and  equalizing  the 
exchanges!  And  manyrwho  mTdoubt  had  been" 
posed  to  its  charterCput  o 


50  THE  STORY  OF  A  BANK 

<^  scruples~in"nie"Tace  of  dire  necessity/.  And  indeed 
"some  improvement  was  felt  Following  its  organization 
in  spite  of  the  scandalous  methods  of  its  first  opera- 
tions. 

The  Bank  began  by  issuing  post-notes  payable  in 
sixty  days.  Some  of  the  most  prominent  subscribers 
to  the  shares,  including  directors,  both  those  elected 
and  those  appointed  by  the  President,  seemed  to  be 
obsessed  with  gambling.  They  entered  upon  a 
manipulation  of  the  stock  of  the  Bank  in  true  pirati- 
cal style,  particularly  those  surrounding  the  branch 
at  Baltimore,  as  will  be  related  in  some  detail. 
Within  a  short  time,  nineteen  branches  had  been 
established,  the  clamor  for  them  coming  from  almost 
every  business  center.  The  officers  of  these  were 
for  the  most  part  incompetent  and  reckless,  and 
disobedient  to  orders.  If  the  local  banks  had  been 
inimical  to  the  charter  of  the  national  concern,  the 
people  of  the  different  sections  of  the  country  now 
seemed  to  think  that  it  had  been  established  with  a 
view,  not  only  of  providing  them  with  good  money, 
but  also  with  plenty  of  it  from  Government  income. 
It  is  observed,  too,  that  it  was  assumed  about  this 
time,  that  paper  issues  had  really  superseded  specie 
as  money;  and  also,  as  Sumner  observes,  as  always 
occurs  under  similar  financial  disarrangements,  that 
it  was  specie  which  had  advanced  and  not  the  paper 
which  had  depreciated. 

fo  n.{\(\  tr>  its  rliffip^li;]^  flip  Bank  was  harassed 

from   ttift  start  by  tW  */<t.inna  of  the  local   banksln 


THE  STORY  OF  A  BANK  51 

refusing  payment,  of  specie  on  their  notes,  which  the 
Bank  held,  while  no  such  leniency  was  extended  it 
from  any  quarter^  So  many  men  of  influence,  polit- 
ical and  financial,  were  stockholders  in  the  local 
banks,  that  care  was  taken  by  the  political  manage- 
ment of  the  big  Bank  not  to  offend  them  by  too 
strong  insistence.  And  the  wretched  condition  of  the 
currency,  its  varying  depreciation  from  day  to  day, 
and  from  place  to  place,  with  resumption  something 
of  a  farce,  made  regulation,  under  the  present  system 
of  management,  practically  impossible. 

In  spite  of  fraudulent  operations  of  its  management 
the  Bank  appeared  prosperous,  and  in  1818  its  loans 
and  discounts  reached  $41,400,000.  In  1817  it  paid 
a  dividend  of  8%  and  in  1818  one  of  5^%.  The 
payments  on  stock  subscriptions,  it  will  be  remem- 
bered, were  in  three  installments,  the  second  and  third 
being  payable  $10  in  specie  and  $25  in  public  stock. 
The  second  installment  payment  was  due  January  1, 
1817,  and  specie  was  then  at  6%  premium  at  Phila- 
delphia. At  a  directors'  meeting  December  18,  it 
was  voted  to  make  loans  on  the  shares  of  the  bank 
stock  in  order  to  facilitate  what  would  be  regarded  a 
specie  payment  on  the  same — the  board  afterward 
making  a  certain  limitation  to  this  privilege.  It 
will  be  seen  at  once  into  what  treacherous  waters 
they  were  sailing. 

This  being  taken  in  some  quarters  as  really  an 
evasion  of  the  provision  for  specie  capital,  a  resolution 
was  introduced  in  the  House,  January  6,  by  Forsyth 


52  THE  STORY  OF  A  BANK 

(later  Van  Buren's  Secretary  of  State)  inquiring 
whether  the  payment  of  the  specie  part  of  the  second 
installment  had  been  evaded.  It  went  to  the 
Committee  on  Currency  which,  acting  under  it, 
addressed  a  letter  to  one  of  the  directors,  Lloyd,  who 
was  then  in  Washington,  and  who  in  reply  admitted 
that  discounts  had  been  made  to  facilitate  the  second 
specie  payment;  but  he  sought  to  excuse  it  by 
arguing  that  otherwise  the  payment  could  not  possi- 
bly have  been  made.  Upon  this,  Forsyth  introduced 
another  resolution,  to  the  effect  that  the  Bank  should 
not  be  permitted  to  go  on  with  its  operations  or  to 
receive  public  deposits  until  the  second  installment 
had  been  paid  according  to  the  terms  of  the  charter. 
But  it  would  seem  that  Congress  at  that  time  was 
in  sympathy  with  this  independent  method  of  bank- 
ing, which  was  in  fact  common  to  local  concerns,  as 

the  resolution  was  not  passed.  _^ 

These  transgressions  of  the  new  Bank,  instead  of 
^checking  inflation  as  was  hoped,  was  reaTTy~*lhe 
adoption  of  the  worst  fratiiresg^banking  then  preva- 
lent^ As  a  sound  authority  tersely  states  it,  "From 
the  very  brink  of  resumption,  the  great  Bank  carried 
the  whole  country  back  into  the  slough  of  inflation 
and  depreciation."  Just  what  was  done  to  effect 
this  degradation  is  most  concisely  learned  by  fol- 
lowing the  report  of  the  House  Committee  of  inves- 
tigation, which  was  appointed  under  a  resolution  of- 
fered by  John  C.  Spencer  of  New  York  in  Novem- 
ber, 1818,  the  report  being  dated  January  16, 1819. 


THE  STORY  OF  A  BANK  53 

First,  the  Committee  exonerated  the  Bank  on 
one  charge  that  had  been  flung  at  it  recklessly.  "The 
[  Committee  have  not  found  any  evidence  of  the  Bank 
laving  attempted  to  oppress  the  State  banks,  either 
)y  wanton  demands  of  specie,  or  by  the  rejection  of 
their  notes.  Much  complaint  had,  indeed,  existed, 
but  in  the  instances  which  have  come  to  the  knowl- 
edge of  the  Committee,  the  State  banks  have  been  in  . 
the  wrong,  and  some  of  them  at  the  Westward  have 
refused  the  most  equitable  propositions  of  the  Bank, 
and  have  met  its  demands  for  its  just  dues  with 
complaints  and  reproaches."  *  The  Bank  was  indeed 
criticised  for  its  forbearance  towaroTtne^oTralTjaiiks,  ^ 
in  not  holding  them  more  jtrict.lv  to  their  engage- 
ments, which  is  strong  evidence  of  the  selfish  ano^ 
discreditable  attitude  ofthe  local  banks  previously 
allude^  t.n. 

But  the  Spencer  Committee  found  enough  other 
things  that  had  been  going  wrong  to  warrant  its 
apparently  sincere  efforts.  Besides  lending  on 
pledges  of  its  own  stock  for  payment  of  the  install- 
ments, dividends  had  actually  been  paid  to  a  few 
shareholders  who  had  not  made  payment  for  their 
stock,  even  in  that  easy  way.  It  was  impossible  for 
the  Committee  to  determine  exactly  how  much  specie 
had  been  paid  in;  but  of  the  third  installment,  which 
should  have  brought  in  $2,800,000,  it  is  believed  a 
very  trifling  amount  was  paid,  and  as  little  in  United 
States  bonds.  On  the  contrary,  there  was  evidence 


*Doc.  Hist.  U.  S.  Bank,  p.  174  et  seq. 


54  THE  STORY  OF  A  BANK 

that  nearly  the  whole  of  the  second  and  third  install- 
ments were  paid  by  notes  discounted  on  the  pledged 
stock.  The  amount  of  specie  in  the  Bank,  February 
17,  1819,  was  only  $1,724, 109,  or  only  $324,000  more 
than  the  specie  part  of  the  first  installment.  It  would 
appear  that  certain  speculative  stock  subscribers 
drew  out  of  the  Bank  the  coin  paid  in  by  other 
subscribers  in  order  to  pay  it  into  the  Bank  again  on 
subsequent  installments  on  their  own  shares — "an 
operation  of  more  potency  in  creating  specie  than  was 
ever  ascribed  to  the  fabled  fingers  of  Midas."  So 
said  the  report,  almost  in  a  spirit  of  admiration. 

The  Committee  observed  that  this  kind  of  man- 
ipulation had  prevented  the  shares  going  more  into 
the  hands  of  solid  capitalists,  as  it  ran  the  price  up 
inordinately.  The  amount  of  discounts  made  on 
pledged  stock  up  to  July  13,  1817,  a  little  more  than 
half  a  year,  was  $8,046,932.64,  but  of  this  there 
had  been  repaid  $2,815,000.  The  Committee  was 
also  surprised  to  find  so  little  good  business  paper  in 
the  Bank,  where  it  was  to  have  been  reasonably 
expected  that  the  merchants  would  transact  their 
business.  Directors  admitted  that  they  did  give 
preference  to  stock  notes  over  business  paper,  and 
some  of  the  Government  directors  were  among  the 
worst  offenders  in  this  disreputable  business.  Among 
those  directors  was  President  William  Jones,  George 
Williams,  Dennis  A.  Smith,  and  James  W.  McCul- 
loch,  cashier  of  the  Baltimore  branch;  three  Govern- 
ment directors,  Pierce  Butler,  John  Connely  and 


THE  STORY  OF  A  BANK  55 

Walter  Bowne  had  not  been  concerned  in  the  stock 
jobbing.  Jonathan  Smith,  the  cashier  at  Philadel- 
phia, and  McCulloch  were  both  badly  implicated; 
much  the  worst  condition  was  found  in  the  Baltimore 
branch.  This  was  surrounded  by  a  clique  which 
had  by  sharp  practice  violated  the  intent  of  that 
provision  of  the  charter  governing  the  voting  power 
of  the  shares.  The  Baltimore  holdings  were  about 
one-seventh  of  the  whole  stock,  whereas  by  this 
method  the  holders  cast  more  than  one-fourth  of  all 
the  votes.  The  scheme  was  to  take  stock  in  a  large 
number  of  names,  that  is,  each  nominal  owner  having 
one  share,  and  all  being  voted  by  the  real  owner  who 
acted  as  attorney.  Williams,  the  Government 
director,  owned  1172  shares  in  as  many  names,  which 
gave  him  as  many  votes,  whereas  he  otherwise  would 
not  have  had  over  thirty.  The  Baltimore  specula- 
tors, consisting  mainly  of  James  A.  Buchanan, 
president  of  that  branch,  and  also  of  Smith  &  Bucha- 
nan; his  partner,  Smith,  and  Cashier  McCulloch, 
who  was  a  clerk  in  their  House,  dealt  in  the  shares 
in  ten  and  twenty  thousand  lots,  holding  at  one  time 
over  $6,000,000  worth.  They  carried  1000  shares 
for  President  Jones,  and  made  him  $15,000  by  it, 
which  he  seems  to  have  accepted. 

The  Committee  found  the  charter  violated  in  four 
points:  1.  The  Bank  had  sold  $2,000,000 of  public 
stock  in  England  to  buy  specie,  and  the  Secretary  of 
the  Treasury  desiring  to  redeem  the  stock,  the  Bank 
had  bought  in  the  market  and  delivered  to  him  that 


56  THE  STORY  OF  A  BANK 

amount  at  a  loss  of  $54,264,  the  excuse  being  that 
the  management  did  not  want  to  disturb  the  arrange- 
ment it  had  made  in  England.  2.  The  installments 
had  not  been  paid  as  the  charter  provided.  3.  Divi- 
dends had  been  paid  to  stockholders  who  had  not 
paid  their  installments  on  their  shares.  4.  Persons 
had  been  allowed  to  cast  over  thirty  votes  each  by 
the  device  of  proxies.* 

As  to  the  purchase  of  the  $2,000,000  of  Govern- 
ment stock,  the  Bank  had  acted  only  as  agent  for 
the  Government,  and  the  offense  was  merely  tech- 
nical. It  was  done  with  the  sanction  of  Congress. 

The  Committee  members  probably  were  afraid 
to  trust  themselves  to  comment  according  to  their 
feelings,  as  they  merely  say  that  "they  are  not  aware 
that  any  remarks  which  could  be  made  by  them  could 
present  the  subject  in  stronger  light  than  the  above 
statement  of  facts.  The  same  persons  who  thus 
held  the  power  of  appointing  directors  are  found  to 
have  the  greatest  loans  on  stock."  This  in  the 
opinion  of  the  Committee  was  the  greatest  evil,  and 
the  origin  of  all  the  others.  "The  system  places  the 
property  of  the  other  stockholders  and  of  the  Govern- 
ment, the  credit  of  the  Bank  and  individuals  and  in  a 
measure  that  of  the  nation,  at  the  mercy  of  a  few 
large  stockholders,  who  without  having  contributed 
to  the  wealth  or  the  value  of  the  institution,  have  the 
control  of  its  concerns." 

Of  course  the  Bank  was  in  distress.     Several  things 

*Doc.  Hist. 


THE  STORY  OF  A  BANK  57 

were  necessary  to  insure  its  continuance.  Jones 
resigned  in  disgrace,  and  James  C.  Fisher  became 
president  pro  tempore.  In  July,  1819,  contraction 
of  its  loans  was  ordered  at  Philadelphia,  Baltimore, 
Norfolk  and  Richmond  to  the  extent  of  $5,000,000, 
but  this  order  was  only  partly  complied  with.  The 
delinquency  of  the  State  banks  in  paying  their 
balances  had  contributed  something  to  its  cramps; 
and  more  strenuous  efforts  were  decided  on  to  get 
specie  from  abroad.  Silver  was  then  at  10  per  cent 
premium.  About  $550,000  of  specie  was  with- 
drawn from  the  West.  August  28,  it  was  decided 
to  take  no  branch  notes  save  at  the  branch  of  issue, 
a  policy  which  brought  forth  many  objections,  and 
was  the  cause  of  much  unpopularity.  However, 
the  use  of  branch  drafts  was  extended  with  practical- 
ly the  same  effect,  and  this  led  to  that  abuse  of  draw- 
ing and  redrawing  between  branches  "which  drew 
the  capital  away  from  the  sounder  and  more  conser- 
vative branches  to  the  weaker  and  more  reckless 
ones."  At  Baltimore  it  had  been  the  habit,  not  only 
to  borrow  on  pledges  of  stock,  but  that  branch  had 
discounted  large  sums  on  the  market  premium  of  the 
shares,  up  to  25  per  cent.  These  loans  were  now 
ordered  reduced  to  par.  After  the  investigation  and 
report,  the  speculative  managers  resigned  and  a  new 
directory  was  chosen.  Langdon  Cheves,  recently 
Speaker  of  the  House,  was  on  the  Government  list, 
and  was  elected  to  the  presidency  of  the  Bank,  March 
6, 1819. 


58  THE  STORY  OF  A  BANK 

The  Spencer  Committee  did  not  recommend  any 
drastic  action,  but  advised  the  passage  of  an  act 
requiring  any  person  who  offered  to  cast  over  thirty 
votes,  to  make  oath  that  he  was  not  the  owner  of  the 
shares.  Such  an  act  was  passed,  March  3, 1819.  In 
September,  Cheves  submitted  a  report  which  showed 
specie  on  hand  only  $126,745;  specie  in  the  mint, 
$267,978,  and  in  transit  from  Kentucky  and  Ohio, 
$250,000;  but  the  Treasury  dividends  amounting  to 
nearly  $500,000  were  due.  The  branch  at  New  York 
was  in  little  better  condition,  and  that  at  Boston  was 
even  worse.  The  Bank  at  Philadelphia  owed  Baring 
Bros.,  and  Thos.  Wilson  &  Co.,  London,  nearly 
$900,000  and  had,  including  notes  of  its  branches,  a 
circulation  of  $6,000,000  to  meet. 

It  appeared  that  the  parent  Bank  at  Philadelphia 
was  induced  to  imitate  the  dishonest  proceedings 
at  Baltimore,  much  to  the  harm  of  the  Boston  and 
New  York  branches;  and  it  is  observed  by  one  of  the 
most  candid  critics  of  the  transaction,  that  even  the 
Treasury  Department  entered  into  what  was  effect- 
ually a  conspiracy  against  the  stability  of  the  branch- 
es in  the  Middle  and  Eastern  States,  by  furnishing 
Philadelphia  and  Baltimore  with  large  drafts  on  the 
Government  balances  in  New  York  and  Boston, 
with  the  intention  of  reversing  the  balances  and  plac- 
ing the  funds  where  mismanagement  had  made  them 
most  needed. 

It  cannot  be  questioned,  that  political  favoritism 
had  much  to  do  with  the  trouble  that  was  brought 


THE  STORY  OF  A  BANK  59 

upon  the  Bank  so  swiftly  after  its  organization. 
Jones  seems  to  have  been  ignorant,  not  only  of  the 
details  of  management,  but  also  of  the  functions  of  a 
bank.  There  is  reason  to  believe  that  the  prospects 
of  the  opportunities  which  the  Bank  would  afford,  for 
positions  with  emoluments  and  speculative  profits, 
had  something  to  do  with  the  success  in  securing  its 
charter.  It  is  certain  that  those  who  most  contri- 
buted to  the  early  violations  of  the  charter  and  its 
entirely  unmercantile  transactions,  including  the 
Government  directors,  were  influential  at  Washing- 
ton, and  some  of  them  even  remained  so  after  their 
exposure.  Sumner  states  the  case  in  some  detail  thus : 
"In  the  office  at  Baltimore,  of  which  James  A. 
Buchanan  was  president,  and  J.  W.  McCulloch  was 
cashier,  there  were  nearly  three  million  dollars 
discounted  or  appropriated  without  any  authority, 
and  without  the  knowledge  of  the  Board  of  the  office, 
or  that  of  the  parent  Bank.  S.  Smith  &  Buchanan, 
of  which  firm  J.  A.  Buchanan  was  a  member;  James 
W.McCulloch  and  George  Williams  (the  latter  a 
member  of  the  parent  Board  by  the  appointment  of 
the  President)  had  obtained  of  the  parent  Bank  dis- 
counts in  the  regular  and  accustomed  manner  to  the 
amount  of  $1,957,000  on  a  pledge  of  18,290  shares  of 
stock  of  the  Bank.  These  men,  without  the  knowledge 
of  either  Board  and  contrary  to  the  resolutions  and 
orders  of  the  parent  Board,  took  out  of  the  office  at 
Baltimore  under  the  pretense  of  securing  it  by 
pledging  the  surplus  value  of  the  stock  already 


60  THE  STORY  OF  A  BANK 

pledged  at  the  parent  Bank  for  its  par  value  and 
more,  and  other  like  surpluses  over  which  the  Bank 
had  no  control,  to  the  sum  of  $1,540,000.  . .  When 
this  stupendous  fraud  was  discovered,  attempts  were 
immediately  made  to  obtain  security,  and  it  was 
nominally  obtained  to  the  amount  of  $900,000.  It 
was  probably  really  worth  $500,000 .  . .  The  loss  sus- 
tained in  the  office  in  Baltimore  alone,  the  great  mass 
of  which  accrued  out  of  their  fraud,  and  others  con- 
nected with  it,  have  been  estimated  at  the  immense 
sum  of  $1,671,221.  The  aggregate  of  the  losses  of 
the  institution  growing  out  of  the  operations  which 
preceded  the  6th  of  March,  1818,  exceeded  consider- 
ably $3,400,000.  The  dividends  during  the  same 
time  amounted  to  $4,410,000.  Of  this  sum,$l,348,558 
were  received  as  the  interest  on  the  public  debt  held 
by  the  Bank,  which  leaves  as  the  entire  profits  on  all 
the  operations  of  banking  the  sum  of  $3,061,441, 
which  is  less  by  at  least  $500,000  than  the  losses 
sustained  on  the  same  business." 

In  1822  the  Dividend  committee  found  the  exact 
loss  to  be  $3,743,899. 

The  directors  and  officers  could  make  but  a  lame 
defense  of  their  methods.  They  pleaded  extenuating 
circumstances,  particularly  as  to  discounting  notes 
on  Bank  stock  security;  and  also  claimed  that  they 
labored  under  disadvantages  in  three  respects:  1.  The 
receipt  for  dues  of  notes  issued  by  other  branches 
than  the  one  at  the  place  of  receipt.  2.  Obligations 
to  pay  Treasury  drafts  on  demand  at  any  place. 


THE  STORY  OF  A  BANK  61 

3.  That  their  debentures  must  be  paid  in  coin  while 
dues  were  received  in  notes. 

It  was  not  shown  that  the  Treasury  had  been 
unreasonable  in  placing  its  drafts  for  large  sums  at 
the  branch  banks,  it  being  no  part  of  the  policy  of 
the  present  administration  to  hamper  or  inconven- 
ience the  Bank. 

While  reform  saved  the  Bank,  it  came  out  of  the 
orgy  in  bad  odor  with  the  republic.  Many  had  lost 
in  the  shares,  and  others  had  been  severely  pinched 
in  the  curtailment.  When  the  order  was  given  Aug- 
ust 28,  1818,  that  the  branches  should  cease  receiv- 
ing each  other's  notes,  it  caused  much  hardship,  and 
not  unlikely  was  the  cause  of  a  good  many  failures; 
and  many  laid  the  whole  cause  of  the  panic  that 
came  on,  to  the  evils  of  the  Bank. 


CHAPTER  III 

THE  thoughtful  reader  must  be  impressed 
with  two  principal  facts  in  relation  to  the 
Bank  of  the  United  States  at  this  time. 
One  is,  the  loose  system  under  the  charter 
that  could  have  permitted  so  riotous  and  unlawful 
a  manipulation  of  its  affairs;  and  (with  his  mind  on 
subsequent  events)  the  action  that  was  taken  by  the 
Government,  when  the  fraud  and  the  desperate 
condition  of  the  Bank  were  exposed.  The  record 
of  the  voluminous  debates  in  both  Chambers  of 
Congress  on  the  subject  of  the  charter,  when  it  was 
on  its  passage,  discloses  little  evidence  of  earnest 
study  of  banks  and  banking,  or  any  indication  that 
those  who  engaged  in  the  discussions  were  striving  to 
secure  the  most  scientific  and  efficient  bank  system. 
The  wrangle  was  rather  over  the  frazzled  question  of 
constitutionality,  sectional  advantages  or  disadvan- 
tages, and  the  danger  that  lay  in  creating  a  great 
money  power.  Even  the  advocates  of  the  charter 
argued  more  on  the  benefits  that  would  accrue  from 
a  strong  national  bank,  than  the  necessity  of  utilizing 
the  best  wisdom  of  the  time  in  perfecting  the  system. 
The  ablest  financiers  may  have  influenced  their 
action  in  a  greater  degree  than  the  record  indicates, 
62 


THE  STORY  OF  A  BANK  63 

but  if  only  sound  banking  had  been  the  purpose, 
without  prejudice,  or  thought  of  speculative  oppor- 
tunities, there  would  have  been  less  need  for  an 
investigation,  and  less  humiliation  to  American  finance 
in  the  findings  of  the  Committee. 

While  no  one  will  contend  that  any  banking  system, 
however  perfect,  is  proof  against  organized  rascality 
in  the  management,  it  is  apparent  that  the  loose 
structure  of  the  charter,  leaving  loopholes  in  the 
plan  of  voting  on  the  stock  holdings,  and  the  latitude 
as  to  discounts,  to  say  nothing  of  more  fundamental 
things,  offered  an  encouragement  to  the  speculative 
banditti  that  got  into  the  organization,  especially 
those  that  surrounded  the  branch  at  Baltimore. 
High-sounding  rhetoric  about  inherent  rights  had  not 
protected  the  people  who  invested  in  its  shares,  nor 
the  general  public,  which  suffered  in  the  financial 
distress  that  spread  over  the  country  at  this  time,  and 
for  which  the  fraudulent  operations  of  the  Bank  were 
largely  responsible. 

There  was  of  course  a  great  deal  of  wrath  against 
the  Bank  when  the  facts  about  its  condition  became 
known,  and  those  who  had  opposed  its  charter 
enjoyed  their  opportunity  of  declaring  such  an 
institution  never  could  be  anything  but  a  dangerous 
instrument  in  the  hands  of  the  wicked.  Many 
would  have  revoked  the  charter,  others  would  have 
withdrawn  the  deposits,  or  have  refused  the  Bank's 
notes  at  the  Treasury,  careless  of  the  ruin  that  would 
thereby  have  been  inflicted  on  thousands  of  innocent 


64  THE  STORY  OF  A  BANK 

shareholders,  besides  increasing  the  commercial 
distress  that  already  afflicted  the  country.  There 
was  shown  by  this  rabid  faction  a  good  deal  of  the 
spirit  that  actuated  Jackson  and  his  adherents,  the 
vast  difference  being,  that  now  the  Bank  was  dis- 
graced and  nearly  ruined,  while  in  their  time  it  was 
proved  sound  and  successfully  performing  its  proper 
functions.  They,  in  their  day,  did  not  read  the 
lesson  m  what  was  now  done.  But  fortunately, 
reason  now  prevailed.  Reform  was  at  once  institu- 
ted, those  who  had  betrayed  their  trusts  were  swept 
out,  new  officers  and  directors,  men  of  tried  ability 
and  probity,  were  put  in  their  places,  loose  machinery 
was  tightened  up  by  proper  rules  and  legislation,  a 
careful  curtailment  with  due  regard  for  other  banks 
and  the  commercial  necessities  of  the  community  was 
ordered,  and  the  Bank  was  saved  for  future  years  of 
invaluable  service  to  the  Government  and  to  the 
public.  It  paid  no  dividends  in  '19  and  '20,  but 
resumed  on  a  4%  basis  in  '21;  and  to  1831,  the  aver- 
age from  the  start  was  a  little  over  5%. 

The  Secretary  of  the  Treasury  acceded  to  the 
reasonable  request  of  the  Bank  covering  its  com- 
plaints, previously  noted.  There  was  indeed,  diffi- 
culty in  securing  competent  managers  for  all  the 
branches.  The  present  trouble  had  been  brought 
about  through  incompetency  as  well  as  dishonesty. 
By  curtailments,  especially  in  the  West  and  the 
South,  and  a  loan  of  $2,500,000,  obtained  in  Europe, 
a  considerable  degree  of  safety  was  soon  reached. 


THE  STORY  OF  A  BANK  65 

But  with  all  that  could  be  done,  the  contraction 
caused  a  panic,  and  that  raised  a  storm  of  criticism, 
some  of  which  perhaps  was  reasonable,  but  most  of 
which  was  blatant.  It  is  curious,  too,  that  the  most 
vehement  denunciations  of  the  Bank  were  not  for 
getting  into  the  swamp,  but  for  disturbance  made  in 
getting  out.  Even  Niles,  of  Register  fame,  com- 
plained that  "present  pecuniary  profit  is  sacrificed 
to  concentrate  a  power  to  command  it  hereafter;  to 
regulate  the  transactions  of  individuals ;  to  govern  the 
money  matters  of  the  nation;  to  elect  presidents  of  the 
United  States  and  enact  laws  for  the  government 
of  the  people."  This  is  quoted  merely  as  showing  the 
spirit  of  those  opposed  to  the  Bank,  it  being  the  same 
now,  and  expressed  in  much  the  same  terms,  as  it  was 
in  the  later  days  of  Jackson  and  Kendall  and  Taney. 
There  had  not  been  the  shadow  of  evidence  that  the 
Bank  had  attempted  to  elect  presidents  or  any  other 
officials,  or  that  it  contemplated  doing  so;  and  as  to 
its  regulation  of  the  transactions  of  individuals,  it  of 
course  was  clear  that  a  Bank  that  required  people  to 
pay  their  debts  and  would  not  lend  to  any  one  who 
wanted  credit,  wither  without  security,  must  be  a 
menace  to  individual  liberty.  Whatever  politics  had 
ruled  in  the  Bank,  had  been  injected  into  it  out  of 
"principle" — the  principle  that  its  control  in  all  its  de- 
tails belonged  as  patronage  to  the  party  dominant 
in  the  Government,  rather  than  that  of  selecting 
bankers  with  the  skill  and  experience  and  honesty 
adequate  to  conducting  a  great  moneyed  institution. 


66  THE  STORY  OF  A  BANK 

As  for  the  rogues,  Buchanan,  Williams  and  McCul- 
loch  were  tried  for  conspiracy  to  defraud  the  Bank. 
The  lower  court  in  Maryland  acquitted  them.  The 
decision  was  overruled  by  the  court  of  appeals,  but 
on  retrial  they  were  again  acquitted.  Suits  were 
brought  against  the  officers  of  some  of  the  other 
branches.  At  Louisville,  the  president  and  half  the 
directors  were  turned  out.  The  president  of  the 
Richmond  board  resigned,  there  being  a  deficit  in 
that  branch  of  about  $60,000.  Nor  were. these  the 
only  deficiencies.* 

The  policy  of  the  Government  taking  stock  in  the 
Bank  had  been  questioned  by  able  authorities,  aside 
from  the  question  of  its  power  to  charter.  It  created 
a  public  debt  to  buy  stock  which  might  or  might  not 
prove  profitable.  It  cleared  a  good  profit  from  the 
first  Bank,  but  nevertheless  it  was  something  of  a 
speculative  venture,  and  when  the  great  losses  of  the 
second  Bank  were  exposed  and  the  Government  was 
shown  to  be  out  of  purse  something  like  $500,000, 
as  its  share,  it  caused  a  great  out-cry  from  the  anti- 
Bank  element.  They  claimed  that  they  were  being 
taxed  for  the  privilege  of  being,  through  the  Federal 
Government,  stockholders.  Then  when  the  Govern- 
ment made  gains,  they  asked  why  they  should  not  be 
allowed  to  associate  themselves  in  the  same  kind  of  an 
organization  without  asking  Federal  consent. 

But  the  summing  up  of  the  profits  and  advantages 
that  accrued  to  the  Government,  as  will  be  seen, 


"Catterall,  page  79. 


THE  STORY  OF  A  BANK  67 

leaves  no  room  for  doubt  that  the  partnership  was  a 
profitable  one  from  every  consideration,  and  much 
more  so  than  it  could  have  been  without  a  stock- 
holder's interest. 

The  antipathy  to  a  Federal  bank,  even  though  con- 
trolled by  democrats,  was  increased  by  the  failure  of 
the  attempts  made  by  several  of  the  States  to  tax  the 
branches.  This  movement  grew  out  of  the  com- 
plaints of  the  local  banks,  and  those  interested  in 
them.  The  great  Bank,  in  fact,  at  its  worst  had 
practiced  no  fraud  which  was  not  common  in  the 
methods  of  the  local  banks.  But  the  latter  could  now 
turn  attention  from  their  own  misdoings  by  com- 
plaints of  the  injustice  and  tyranny  of  the  "monopo- 
ly." Maryland  led  by  voting  a  tax  of  ten  cents  on 
each  $5  note,  upward,  or  offered  a  commutation  for 
$15,000.  Attempts  by  Ohio  and  Kentucky  resulted 
more  sensationally.  The  former  attempted  to  tax 
the  two  branches  of  the  Bank  in  that  State  $50,000 
a  year  each  for  the  privilege  of  doing  business  there 
"in  violation  of  the  laws  of  the  State."  In  case  of 
default,  levy  was  to  be  made  on  the  specie  or  notes 
of  the  Bank,  and  search  was  to  be  made  for  them. 
The  Bank  secured  an  injunction  from  the  Federal 
court  forbidding  the  collection  of  the  tax  under  the 
law,  yet  in  September,  1819,  agents  of  the  Auditor 
went  to  the  branch  at  Chillicothe,  entered  the  vault 
and  took  by  force  $120,425,  the  cashier  still  refusing 
to  pay  the  tax.  Five  days  later,  they  returned  the 
amount  in  excess  of  $100,000,  having  been  careless 


68  THE  STORY  OF  A  BANK 

in  helping  themselves,  and  taking  much  more  than 
they  were  expected  to. 

The  Governor  disapproved  of  the  performance, 
and  declared  he  was  ashamed  it  happened  in  Ohio, 
but  he  could  not  get  the  money  restored.  The 
branch  had  to  suspend  payment  for  a  few  days.  The 
agents  of  the  Auditor  were  arrested  for  trespass  with 
violence,  and  being  unable  to  furnish  bail  were 
placed  in  prison,  but  finally  released  on  a  technicality. 
The  money  was  taken  by  the  State  Treasurer,  who 
was  finally  imprisoned  for  contempt,  a  committee 
of  the  Legislature  having  taken  from  him  the  money 
which  the  Federal  court  had  enjoined  him  from  part- 
ing with.  The  Legislature  passed  an  act  outlawing 
the  Bank,  but  the  Supreme  Court  of  the  United 
States  overruled  it,  and  the  act  was  repealed.  The 
Bank  recovered  $98,000  and  continued  to  do  business 
in  the  State.  The  other  States  also  failed  in  their 
endeavors  to  tax  the  branches  therein  out  of  business. 

No  story  of  the  United  States  Bank  can  convey 
an  adequate  understanding  of  the  conditions  under 
which  it  operated,  the  service  it  rendered,  the  obsta- 
cles against  which  it  had  to  contend,  and  the  errors 
it  was  led  into  committing,  without  explaining  in 
intimate  detail  the  processes  of  other  banks  and 
banking  systems  of  the  time,  and  also  the  mental 
processes  of  the  people  in  relation  to  banks.  During 
the  period  of  disgrace  of  the  big  Bank,  and  the  panic 
period  of  1818  to  about  1820,  the  other  banks  were 
behaving  as  discreditably.  These  concerns,  which 


THE  STORY  OF  A  BANK  69 

had  been  declared  equal  to  all  the  requirements  of  the 
United  States  Treasury  for  deposits  of  tens  of  mil- 
lions of  public  funds,  and  the  conservation  of  the 
interests  of  the  people,  were  failing  whenever  and 
however  they  could  make  anything  by  it.  We  have 
seen  how  they  resented  the  attempts  of  the  Secretary 
of  the  Treasury  to  exercise  any  authority  over  them, 
and  how  Crawford  coaxed  them  and  helped  them 
with  the  public  deposits;  and  when  he  tried  coercive 
measures,  how  they  bullied  and  for  a  time  defeated 
him. 

Not  only  had  confusion  and  fraud  resulted  from 
the  operations  of  the  United  States  Bank  and  the 
local  State  banks,  but  also  from  unchartered,  or 
"private"  concerns,  which  issued  notes  to  any  amount 
they  pleased.  This  had  been  particularly  true  in 
the  West,  but  was  at  length  curbed.  In  Indiana  a 
law  was  passed  December  26,  1815,  against  this  sort 
of  free  lance  banking,  the  same  act  providing  punish- 
ment for  counterfeiters  of  bank  notes  "by  a  fine  of 
three  times  the  value,  and  25  to  50  lashes  on  his  or 
her  bare  back."  It  is  not  on  record  that  the  extreme 
punishment  ever  was  inflicted;  in  fact,  the  laws 
generally  against  counterfeiting  were  so  lax,  and  the 
public  feeling  toward  banks  so  inured  to  the  belief 
in  their  dishonest  practices,  that  it  was  a  rare  thing 
to  secure  a  conviction  imposing  a  prison  sentence. 
Sumner  quotes  from  Niles  an  account  of  the  arrest 
in  May  1837,  of  four  persons  in  New  York  City,  on 
suspicion  of  being  counterfeiters,  they  being  found  at 


70  THE  STORY  OF  A  BANK 

work  in  an  attic,  printing  notes  on  the  Ottawa  Bank 
of  Montreal.  They  showed  much  indignation  at  the 
interruption,  claiming  to  be  a  real  bank,one  president, 
another  cashier,  the  others  directors.  They  had  a 
stock  of  $20,000  in  notes,  and  $800  in  silver,  and 
explained  that  they  were  doing  business  in  New  York 
because  it  was  cheaper.  They  were  discharged  on 
the  ground  that  "they  had  violated  no  law."  It  is 
indicative  of  the  currency  conditions  both  of  that 
date  and  at  the  time  the  second  Bank  was  chartered. 
The  methods  of  unscrupulous  banks  Increased  the 
prejudice  of  the  non-mercantile  (and  largely  prepond- 
erating) class  toward  moneyed  concerns.  They 
seem  to  have  regarded  a  national  bank  as  worse  than 
the  others  in  proportion  as  it  was  larger,  and  con- 
trolled by  richer  people.  But  it  should  not  be  for- 
gotten that  the  antipathy  of  the  people  was  not  alone 
toward  the  National  Bank.  The  popular  feeling 
was  bitter  against  banks  as  a  class  to  an  extent  that 
would  appear  entirely  devoid  of  reason  unless  the 
character  of  the  very  large  majority  of  the  banks  of 
the  period  is  considered.  The  State  laws  were  so 
lax  that  they  were  under  little  restriction,  and  as 
Sumner  says,  "They  adopted  all  kinds  of  devices  to 
avoid  any  risk  of  being  obliged  to  redeem  their 
issues.  .  .  .and  when  trouble  came,  suspended"; — 
that  is  to  say  they  withdrew  from  the  performance  of 
their  obligations  while  insisting  on  payments  of 
debts  to  themselves.  The  relation  of  their  various 
schemes  grows  tedious :  Notes  being  printed  payable 


THE  STORY  OF  A  BANK  71 

at  certain  places,  and  other  catch  clauses  printed  in 
small  letters  that  were  usually  overlooked;  requiring 
an  oath,  when  notes  were  presented  for  redemption, 
that  they  were  not  bought  up  for  the  purpose,  and 
that  the  holders  were  not  agents  for  others,  and  in 
some  instances,  charging  fees  for  administering  the 
oath.  The  holders  of  bank  notes  could  not  tell  when 
they  had  real  money.  Many  of  the  so-called  specie- 
paying  banks  had  little  coin  as  a  basis  for  their  notes. 
As  an  example  of  methods,  a  tradesman  interested 
in  a  bank  would  take  a  quantity  of  its  notes  to  ex- 
change. He  paid  them  out  at  every  opportunity 
and  retained  notes  of  other  banks  which  he  brought 
to  his  favorite  bank.  This  provided  that  bank  with 
"specie-paying  funds" — notes  of  "specie-paying 
bankers."  Thus  two  banks,  neither  of  which  had  any 
specie,  but  each  of  which  held  a  quantity  of  the  notes 
of  the  other,  became  "specie-paying,"  because  each 
returned  its  stock  of  notes  to  the  other  as  "specie 
funds,"  or  "cash  items."  Banks  usually  organized 
under  rules  requiring  payments  on  stock  in  install- 
ments; the  bank  to  begin  business  when  one-fourth  or 
one-fifth  of  the  "capital"  was  paid,  only  a  small  per 
cent  to  be  paid  "in  specie  or  bank  bills  which  will 
command  the  same" — which  made  the  specie  require- 
ment a  joke.  Sumner,  from  whose  work  these 
examples  are  mainly  taken,  expresses  a  doubt  if  there 
were  any  honest  banks  and  bankers  of  the  period 
preceding  the  second  War.  These  earlier  banks 
invented  nearly  all  of  the  later  abuses,  and  they  set 


72  THE  STORY  OF  A  BANK 

about  the  exploitation  of  them  with  less  reserve  than 
their  successors.  If  they  did  not  realize  what  a 
mischievous  precedent  they  were  establishing,  that  is 
the  most  that  can  be  said  for  them. 

The  antipathy  to  banks  and  bankers  was,  however, 
deeper  than  resentment  against  their  misdeeds.  It 
sprang  out  of  the  doctrine  of  equality,  and  a  settled 
antagonism  to  everything  symptomatic  of  aris- 
tocracy. For  many  years  there  was  constant  in- 
veighing against  the  favoritism  of  banks  because  they 
would  lend  only  to  the  rich,  that  is  the  solvent;  thus, 
it  was  obvious,  making  the  rich  richer,  and  the  poor 
poorer;  and  it  was  actually  argued,  not  always  by 
the  most  ignorant,  that  banks  should  be  made  to  act 
"equally."  It  will  be  seen  that  these  were  the  bur- 
dens of  Jackson's  complaints,  and  it  was  this  senti- 
ment that  increased  his  popularity. 

History  shows  that  the  State  banks,  like  the  Bank 
of  the  Commonwealth  in  Kentucky,  tried  the  policy 
of  popular  banking — lending  to  insolvents — and  in 
the  words  of  Sumner,  "Their  experiment  was  ample, 
unreserved,  and  conclusive.  The  effect  of  giving 
equal  credit  to  all,  at  least  to  those  who  were  free- 
holders, was  to  ruin  everybody,  and  at  last  the  bank 
also."  Governor  Slaughter  of  Kentucky,  in  one  of 
his  messages  to  the  Legislature  (1818),  expressed  a 
fear  of  banks  and  of  a  moneyed  aristocracy  founded 
on  them,  while  Desha,  previously  quoted  herein, 
expressed  in  Congress  a  fear  even  of  the  growing 
power  of  Commerce — it  was  likely  to  prove  danger- 
ous to  the  agricultural  interests. 


THE  STORY  OF  A  BANK  73 

Throughout  the  South  and  West  the  United  States 
Bank  was  as  unpopular  as  a  foreign  institution,  being 
a  creation  of  Eastern  wealth,  and  an  unsympathetic 
"monster"  that  actually  expected  payment  of  loans 
when  due.  Senator  White  of  Kentucky  condoned 
this  feeling  with  the  explanation  that  under  primi- 
tive conditions  the  people  had  not  been  accustomed  to 
such  punctuality  in  their  dealings;  and  as  is  always 
the  case,  "although  the  Bank  had  been  popular  when 
making  loans,  it  soon  became  very  unpopular  when 
trying  to  collect  its  debts." 

The  local  banking  system  was  so  scandalous,  so 
ruinous,  so  lacking  in  sanity  and  honesty,  that  one 
wonders  how  a  nation  of  people  claiming  superior 
intelligence,  if  not  omniscience,  ever  could  have 
permitted  it  to  grow  up  among  them;  and  having 
discovered  its  evils,  how  they  could  have  objected  to 
a  Federal  system  giving  uniformity  and  security.  The 
heresy  of  paper  issues  was  largely  at  the  bottom  of  it. 
The  necessity  for  specie  or  real  capital  came  to  be 
hardly  recognized.  "The  possession  of  capital  was 
of  no  use  except  to  inspire  confidence.  This  being 
once  established,  the  capital  was  an  inconvenience, " 
says  Sumner.  This  was  practically  as  true  of  those 
banks  organized  by  the  States  themselves,  and 
which  may  properly  be  designated  as  banks  of  the 
State,  to  differentiate  them  from  the  local  State 
institutions.  The  experience  of  the  States  in  bank- 
ing may  not  be  very  interesting  history,  but  it  has 
its  value  in  showing  the  danger  of  trusting  to  popular 


74  THE  STORY  OF  A  BANK 

opinion  and  to  politicians  unskilled  and  unlearned  in 
finance  in  the  formation  of  a  banking  system. 

Legislators,  in  bank  making,  seemed  to  have  no 
idea  that  the  operation  of  a  moneyed  institution 
required  special  skill  or  training.  They  set  up  a 
bank  of  the  State  with  $1,000,000  or  $2,000,000, 
expecting  it  to  produce  profits  automatically.  They 
always  had  candidates  from  among  their  number  to 
fill  the  offices ;  at  least  they  usually  were  filled  through 
political  pull.  "The  case  was  fortunate  when  the 
worst  that  could  be  laid  to  them  was  incompetency." 
The  theory  of  rapid  rotation  in  office  held  with  respect 
to  banks,  as  well  as  to  public  business.  It  was  a 
common  thing  for  bank  managers  to  abuse  their 
positions  for  private  advantage,  but  they  were 
rarely  or  never  brought  to  serious  account  for  it. 
Even  the  prosecution  of  the  officials  who  defrauded 
the  Baltimore  branch  of  the  national  Bank  resulted 
as  we  have  seen,  in  a  total  miscarriage  of  justice. 

As  a  sample  bank  of  the  State,  we  may  glance  at 
that  of  Illinois,  incorporated  January,  1821,  for 
ten  years,  with  a  capital  of  $500,000,  all  owned  by  the 
State.  It  was  located  at  Vandalia.  The  president 
and  directors  were  elected  by  the  Legislature.  Its 
first  issue  of  notes  was  from  $1  to  $20  at  2%  interest, 
recommended  to  be  allotted  to  districts  according 
to  population.  They  were  loaned  up  to  $100  upon 
personal  security  (endorsers);  over  that  amount  on 
land  security,  loans  being  renewable  yearly,  and  to  be 
paid  in  installments  within  ten  years.  The  lands 


THE  STORY  OF  A  BANK  75 

and  revenues  of  the  State  were  pledged  for  the  debts 
of  the  bank.  State  funds  were  to  be  deposited  in  the 
bank.  The  school  moneys  received  from  the  United 
States  were  paid  over  to  it,  and  notes  for  double  the 
amount  were  issued  and  loaned  as  explained.  We 
find  it  stated  that  the  school  funds  were  misapplied 
and  squandered  during  the  life  of  the  bank.  Of 
course  almost  anybody  could  get  an  endorser  for 
$100.  Many  never  expected  to  pay,  and  never 
paid.  It  was  an  extremely  hopeful  paternal  scheme, 
and  nobody  seemed  to  doubt  that  it  was  in  perfect 
harmony  with  democracy.  Whether  it  was  in 
accord  with  economic  laws,  no  one  seemed  to  care. 
Ford  quotes  Ninian  Edwards  as  declaring  in  the 
campaign  of  1826,  that  the  State  was  paying  out 
notes  of  the  bank  at  33  cents  on  the  $1,  this  showing 
their  depreciation,  but  that  it  had  to  receive  them  as 
taxes,  etc.,  at  face  value.  During  the  ten  years' 
life  of  the  bank,  the  State's  loss  is  figured  to  have 
been  more  than  $300,000  through  thus  receiving  and 
paying  out  currency,  with  an  additional  loss  of  $100,- 
000,  through  the  small  loans  that  were  never  collect- 
ed. Of  course  the  State  had  to  make  good.  This  is 
probably  a  fair  example  of  State  banking  experience, 
though  it  is  not  the  most  disastrous. 

Few  persons  outside  of  the  banking  fraternity  are 
now  aware  of  the  extent  and  calamitous  results  of 
such  State  banking.  Tax-payers  were  brought  to 
favor  the  scheme  under  the  expectation  that  the 
State  would  make  large  profits,  and  thus  taxation 


76  THE  STORY  OF  A  BANK 

would  be  made  unnecessary.  All  banks  of  the 
States  were  based  on  the  proposition  that  the  "credit" 
of  the  State  could, to  almost  any  extent,take  the  place 
of  capital  and  perform  its  functions.  It  was  a  part 
of  the  illogical  conception  of  the  authority  and  powers 
of  the  State.  Even  after  the  system  had  been  proved 
a  failure,  the  political  "bankers"  kept  it  alive  by 
orating  of  "higher  purposes" — development  of 
resources,  equal  facilities  to  rich  and  poor,  etc. 
These  demagogic  phrases  pleased  the  people  until 
taxes  began  to  be  levied  to  pay  the  deficits.  But 
this  was  not  the  end.  The  politicians  then  sought 
popularity  by  enacting  "relief"  laws,  providing  for 
interminable  stays,  replevins,  and  protection  for 
debtors,  that  had  a  distinct  tendency  to  encourage 
insolvency.  The  creditor  seems  to  have  had  no 
friends  whatever. 

The  effect  of  such  financing  and  legislating  could 
not  be  otherwise  than  quite  as  evil  morally  as  it  was 
economically.  Of  course  there  was  at  last  a  revul- 
sion of  feeling;  the  few  bank  officials  who  tried  to 
prove  loyal  to  their  trusts  exposed  the  methods  of 
the  tricksters.  The  blunt  president  of  the  Bank  of 
Tennessee  set  forth  to  the  Legislature  of  that  State 
in  1845,  in  plain  words,  the  fact  that  they  could  not 
expect  to  have  the  bank  a  success  and  plunder  it  too; 
and  was  regarded  as  an  aristocratic  reactionary. 
Professor  Sumner  says  that  "more  evil  and  distress 
resulted  from  these  State  bank  schemes  than  from  all 
monopolies  and  plutocrats  through  all  the  decades." 


THE  STORY  OF  A  BANK  77 

It  may  be  mentioned  here  that  conditions  growing 
out  of  State  banking  in  Kentucky,  had  a  direct 
bearing  on  the  "Bank  war"  of  Jackson's  administra- 
tion. Certain  "relief  laws"  were  declared  unconsti- 
tutional by  the  court.  The  Legislature  denied  the 
power  of  the  courts  to  annul  its  acts.  This  caused  a 
clash  between  the  Legislature  and  the  Judiciary. 
The  Legislature  sought  to  annihilate  the  court,  and 
passed  an  act  in  1824,  repealing  the  laws  under  which 
the  Court  of  Appeals  was  organized,  at  the  same  time 
passing  a  bill  under  which  a  new  court  was  organized. 
This  made  an  Old  Court  party  and  a  New  Court 
party.  The  Old  Court  denied  the  constitutionality 
both  of  the  Repeal  act  and  of  the  New  Court  act, 
and  continued  in  existence.  The  State  now  had  two 
courts  of  the  same  jurisdiction.  The  New  Court 
party  hated  the  Bank  of  the  United  States,  particu- 
larly its  branches  in  that  region,  and  charged  them 
with  giving  pecuniary  aid  to  the  Old  Court  party. 
One  of  the  most  belligerent  of  the  New  Court  party 
was  Amos  Kendall,  a  pedagogue  turned  lawyer,  who 
wrote  vituperative  pamphlets  on  his  side  of  the 
question.  The  New  Court  held  the  Court  records 
during  1825  by  military  force,  and  civil  war  was 
avoided  only  by  the  moderation  of  their  opponents. 
Finally,  there  was  a  compromise.  This  did  not 
relieve  Kendall  of  his  vindictive  feeling  toward  the 
Bank  of  the  United  States.  He  carried  it  to  Wash- 
ington a  few  years  later,  and,  as  we  shall  see,  was  one 
of  those  most  active  in  inspiring  Jackson's  course. 


78  THE  STORY  OF  A  BANK 

As  for  the  conflicts  between  the  United  States 
Bank  and  various  local  banks,  it  would  be  a  tedious 
recital  to  give  many  of  them  in  detail.  Langdon 
Cheves  had  his  troubles  with  them.  The  local  banks 
had  enjoyed  large  immunity  from  paying  their 
debts — redeeming  their  notes  in  specie — under  Jones, 
and  claimed  the  same  under  Cheves.  The  Georgia 
banks  made  a  direct  issue  of  the  matter.  They  wrere 
required  to  make  weekly  settlements,  but  complained 
that  this  greatly  cut  down  the  volume  of  their 
issues,  making  the  impudent  request  that  no  more 
of  their  notes  be  received  at  the  Savannah  branch, 
and  declining  to  redeem  notes  presented  by  it. 
Litigation  resulted,  and  was  settled  in  the  Supreme 
Court  of  the  United  States  in  favor  of  the  Bank.  Re- 
lations were  then  re-established.  The  banks  in  New 
York  City  and  elsewhere,  after  the  accession  of 
Biddle,  also  objected  to  weekly  settlements. 


CHAPTER  IV 

WHILE  the  financial  panic  that 
occurred  in  1819  was  aggravated  by 
the  reckless  conduct  of  the  United 
States  Bank,  the  latter  cannot  be 
charged  with  causing  it.  As  has  been  stated,  the 
period  from  1812  to  the  time  the  Bank  was  organized 
had  been  one  of  extreme  inflation.  Local  banks  had 
multiplied  beyond  all  demand  or  reason.  Some  of 
the  States  put  checks  on  new  charters  and  renewals, 
but  that  was  the  exception.  In  Pennsylvania  a  bill 
was  passed  authorizing  the  incorporation  of  forty- 
one  banking  institutions  with  a  combined  capital 
of  over  seventeen  millions.  The  Governor  vetoed 
it,  but  it  was  passed  by  the  constitutional  majority, 
March  21, 1814,  and  under  it  thirty-seven  banks  were 
organized. 

By  mid-year,  1819,  the  panic  reached  its  height. 
There  was  terrible  distress  in  all  the  cities,  many 
thousands  of  persons  being  turned  out  of  employ- 
ment. In  June,  Smith  &  Buchanan  failed  at  Balti- 
more, the  crash  being  a  far-reaching  one.  They  had 
long  been  known  as  plungers  in  the  speculative  world, 
and  for  two  years  or  more  had  undoubtedly  leaned 
heavily  on  the  Bank.  Failures  in  New  York, 
79 


80  THE  STORY  OF  A  BANK 

Philadelphia,  and  other  cities  were  numerous  and 
heavy,  and  the  country  did  not  recover  from  the 
shock  for  three  or  four  years.  Prices  are  reported 
to  have  dropped  50  to  60%,  and  during  much  of  the 
time  the  bank  note  issues  that  made  up  much  of  the 
circulating  medium  were  of  such  uncertain  value 
that  no  one  could  tell  how  much  "money"  he  had. 
Their  depreciation  was  sometimes  found  to  be  more 
than  one-half. 

Under  the  conservative  administration  of  Cheves, 
the  Bank  was  soon  brought  into  a  sound  condition. 
It  retained  $3,795,400  of  its  stock,  taken  on  pledges, 
and  subscribed  for  Government  loans  of  $6,000,000, 
which  virtually  reduced  the  capital  of  the  Bank  by 
these  amounts  for  the  time  being.  There  was  also 
suspended  debts  of  $10,000,000  when  Cheves  took 
hold.  The  provision  in  the  charter  that  made  no 
director  except  the  president  eligible  for  the  position 
more  than  three  years  out  of  four,  was  regarded  by 
some  as  an  unwise  one,  as  it  worked  to  deprive  the 
Bank  of  the  services  of  some  of  its  best  qualified 
directors;  but  Biddle,  in  after  years,  approved  it,  as 
it  also  aided  in  getting  rid  of  incompetents.  Con- 
servative management  had  in  the  two  years  rein- 
stated the  Bank  in  the  confidence  of  the  business 
public,  and  its  shares  again  advanced  above  par. 
Nicholas  Biddle  was  appointed  a  Government 
director  in  1819,  elected  a  stockholders'  director  in 
1820,  and  was  elected  president  of  the  bank,  Novem- 
ber 25,  1822,  "there  being  but  one  vote  against  his 


THE  STORY  OF  A  BANK  81 

nomination  for  the  office. ' '  The  contest  was  between 
the  conservative  element  and  that  which  grew  dis- 
satisfied with  Cheves,  the  latter  stockholders  advo- 
cating a  more  enterprising  policy.  It  has  been  said 
that  Cheves,  who  was  above  all  things  conservative, 
had  the  idea  that  the  only  consideration  with  regard 
to  the  Bank  was  to  be  safe.  But  the  stockholders  had 
not  put  in  their  money  for  that  alone.  They  expect- 
ed dividends.  Cheves'  policies  had  saved  and  resus- 
citated the  Bank,  but  they  would  not  meet  the 
requirements  of  prosperity. 

When  Biddle  took  charge  January,  1823,  he  was 
only  thirty-seven  years  old.  He  was  a  Pennsylvanian 
and  had  served  in  the  House  of  Representatives  at 
the  time  his  father  was  in  the  Senate.  He  had  a 
good  education,  was  of  an  ardent  temperament, 
ambitious,  enthusiastic,  and  has  been  generally 
credited  with  possessing  a  genius  for  finances. 
Whether  or  not  he  was  a  "safe"  banker  depends 
largely  upon  what  period  of  his  career  judgment  is 
passed.  Biddle  was  a  government  director  in  1819, 
1820  and  1821.  In  1822,  he  was  not  a  director; 
from  1829,  he  was  also  elected  stockholders'  director, 
and  held  the  double  qualification  in  1830,  1831  and 
1832.  After  that  he  was  not  a  government  director. 
—  (Sumner)  He  was  a  Harvard  graduate,  and  had 
been  secretary  to  the  American  ministers  at  London 
and  Paris.  He  had  practiced  law  and  literature,  and 
had  edited  Lewis'  and  Clark's  Journal  of  Explora- 
tions. 


82      ;     3  ;£THE  STORY  OF  A  BANK 

At  the  time  of  Biddle's  assuming  the  presidency,  a 
statement  of  the  Bank  showed4the  following :  Circu- 
lation $4,300,000,  specie  $4,400,000,  public  deposits 
$2,700,000,  public  officers  $1,500,000,  private  depo- 
sits $3,300,000,  loans  $30,700,000,  public  stocks, 
$11,000,000.  During  the  ensuing  two  years  the 
capital  was  increased  by  the  sale  of  $3,000,000  or 
$4,000,000  of  stock  that  had  been  forfeited  to  it. 
The  suspended  debts  of  $10,000,000  had  been  skil- 
fully handled  and  mostly  saved.  Liquidation  had 
been  so  drastic  during  the  panic  and  immediately 
afterward,  we  find  that  by  1823  the  currencies 
of  the  different  States  were  all  substantially  equal 
on  the  Atlantic  Coast  at  about  par.  After  the 
reorganization  under  Cheves  the  policy  of  apportion- 
ing capital  to  the  different  branches,  in  amounts 
deemed  sufficient  for  their  needs,  and  requiring  them 
to  operate  on  that,  was  adopted,  and  seemed  a  wise 
course. 

In  1823,  and  the  two  following  years,  the  Bank  took 
Government  loans  of  $10,000,000,  which  resulted  in 
almost  bringing  it  and  other  banks  to  a  suspension 
of  specie  payments  two  years  later.  From  now  on 
the  Bank  dealt  in  exchange,  buying  and  selling  bills 
on  all  points  where  it  had  branches  on  terms  which 
gave  it  a  profit.  It  had  previously  only  discounted 
notes  payable  at  the  places,  or  for  accommodation  at 
a  distance,  and  not  for  profit.  As  might  have  been 
expected,  its  engaging  in  the  exchange  business 
excited  the  hostile  criticism  of  other  banks,  under  the 


THE  STORY  OF  A  BANK  83 

assertion  that  it  ruled  the  rates.  As  will  be  seen 
later,  there  was  no  more  justice  in  this  criticism  than 
in  most  of  the  others  coming  from  the  competing 
banks. 

For  a  number  of  years  atter  the  recovery  from  the 
panic  of  1819,  business  conditions  throughout  the 
country  continued  favorable,  and  banking  conditions 
especially  were  improved.  It  is  true  there  was 
something  of  a  flurry  in  the  spring  of  1825,  which  was 
brought  about  by  sudden  depreciation  in  the  price 
of  cotton.  A  drop  of  3d.  a  pound  occurred  at  Liver- 
pool, and  a  strain  was  also  caused  by  large  Govern- 
ment drafts  to  found  a  bank  at  New  Orleans.  This 
period  was  the  first  severe  test  of  Biddle's  skill.  He 
met  the  situation  quite  as  a  master,  selling  $2,000,000 
more  of  public  stock  for  cash  to  meet  the  demands. 
It  is  declared  that  the  Bank  saved  the  country  from 
the  throes  of  a  panic  at  this  time.  In  January,  1825, 
the  specie  in  the  Bank  stood  at  $6,700,000;  by  July 
it  was  down  to  $4,000,000.  But  with  the  exception 
of  this  brief  storm  there  was  clear  sailing  until  "Old 
Hickory"  came  on  the  scene. 

In  the  light  of  subsequent  criticisms  of  Biddle  for 
speculative  tendencies,  it  is  to  be  noted  that  during 
this  period  the  stockholders  complained  of  his  conser- 
vatism, as  they  had  of  Cheves,  and  urged  a  more 
liberal  policy.  They  did  not  want  the  Bank  to  keep 
a  check  on  the  currency  of  the  country  at  their 
expense  in  the  way  of  small  dividends.* 


*Catterall  p.  110. 


84  THE  STORY  OF  A  BANK 

In  the  chronicles  of  the  Bank  we  read  of  repeated 
efforts  to  induce  Congress  to  pass  an  act  permitting 
other  officers  besides  the  president  and  cashier  to 
sign  the  notes.  This  had  become  a  huge  task,  and  a 
great  strain  on  the  physical  vitality  of  both  the 
officers  named.  But  for  this,  Congress  was  deaf 
to  their  petitions.  Its  excuse  was  that  the  notes  of 
the  Bank  would  not  be  uniform  if  any  of  them  were 
signed  by  proxies.  It  was  in  fact,  the  limitations  of 
the  capacity  of  the  two  principal  officials  in  signing 
notes  of  issues  that  led  to  the  revival  of  the  use  of 
private  drafts,  which  was  suspended  during  the  panic. 
It  may  be  mentioned  in  this  connection  that  at 
the  time  the  Bank  stopped  issues  from  the  branches 
it  refused  to  receive  for  credit  of  the  United  States 
Treasury  anything  but  specie  or  its  own  notes.  It 
could  not  afford  to  take  notes  of  banks,  most  of  whom 
would  not  redeem  them.  This  was  another  thing 
that  gave  a  good  many  people  what  they  believed  to 
be  a  cause  for  a  grievance.  Those  who  owed  for 
public  lands  were  now  obliged  to  pay  specie,  an 
exceedingly  difficult  thing  for  them  to  do.  Craw- 
ford made  this  his  defense  for  distributing  public 
moneys  so  that  it  might  favor  land  debtors.  This 
appears  to  have  been  a  reasonable  thing  for  him  to  do; 
and  it  also  appears  that  in  his  criticisms  of  the  Bank 
and  his  talk  about  its  becoming  a  political  peril,  he 
was  playing  the  demagogue. 

However,  the  private  drafts  were  a  cause  ultimate- 
ly of  much  sorrow  to  the  Bank,  convenient  as  they 


THE  STORY  OF  A  BANK  85 

were  for  some  years.  They  were  drafts  drawn  by  the 
cashier  of  any  branch  on  the  parent  bank  to  the  order 
of  some  officer  of  the  branch  and  endorsed  by  another 
officer  to  bearer.  They  circulated  like  notes.  Some 
question  about  them  arose,  but  at  different  times 
Binney,  Wirt,  and  Webster  gave  opinions  that  the 
drafts  were  entirely  legal.  The  total  receipts  of  these 
drafts  at  Philadelphia,  New  York,  Boston  and 
Baltimore  in  1828-29,  amounted  to  over  $37,000,000. 
The  South  and  the  West  paid  for  their  purchases  in 
those  markets  with  that  kind  of  exchange.  Gallatin 
said  "They  are  of  the  same  character,  depend  on  the 
same  security,  and  in  case  of  failure,  would  share  the 
same  fate  as  bank  notes.  Though  not  usually 
included  in  the  amount  of  the  circulation  of  the  Bank, 
we  cannot  but  consider  the  average  amount  in  circu- 
lation as  making  part  of  the  currency  of  the  country." 
The  Secretary  of  the  Treasury  approved  them  and 
allowed  dues  to  the  Government  to  be  paid  in  them; 
nevertheless,  they  met  with  a  good  deal  of  objection 
subsequently,  for  soon  after  their  reintroduction,  the 
so-called  "race  horse"  bills,  reappeared,  this  term 
being  applied  to  the  system  of  drawing  between  the 
different  places  where  there  were  branches,  so  that 
a  bill  falling  due  at  one  place  was  met  by  the  dis- 
count of  a  bill  drawn  on  another  place. 

It  was  at  this  period  that  the  first  attempts  were 
made  to  introduce  a  uniform  system  of  bankruptcy. 
Bills  to  this  purpose  were  introduced  at  the  Session 
'26-'27,  but  there  was  too  much  opposition  to  allow 


86  THE  STORY  OF  A  BANK 

their  passage.  Objectors  affected  the  belief  that  the 
measure  would  apply  to  the  wealthy  more  than  to 
the  poor,  and  also  that  the  operation  of  such  a  law 
would  benefit  the  Atlantic  sea  board  at  the  expense 
of  other  parts  of  the  country.  It  is  notable,  too,  that 
up  to  this  time  it  had  been  difficult  in  any  of  the 
States  to  secure  laws  abolishing  imprisonment  for 
debt,  which  seems  remarkable  in  the  face  of  such 
legislation  as  has  been  referred  to,  aiding  debtors,  by 
stays  and  replevins,  to  evade  payment. 

As  evidence  of  the  satisfactory  operation  of  the 
Bank,  the  records  show  that  at  a  meeting  of  the 
stockholders  in  1828,  there  was  much  congratulation 
over  its  good  managment  and  prosperity.  Its  losses 
had  been  largely  made  up.  Most  of  its  enemies 
appeared  to  be  conciliated,  or  at  least  they  were  not 
making  much  noise.  It  is  true,  there  was  some 
complaint  and  jealousy  over  the  exchange  operations, 
charges  for  drafts  being  considered  too  high,  and 
indeed  the  profits  from  this  department  in  1828,  were 
$500,000,  yet  the  rates,  the  historians  assert,  were 
not  unusual.  This  is  proved  by  the  higher  charges 
after  the  Bank  ceased  to  be  a  national  concern,  re- 
ferred to  in  Kentucky  in  1838,  as  "the  shameful 
brokerage  and  shaving  on  the  exchanges  practiced 
by  the  banks  of  the  South  and  West." 

During  these  years  incident  after  incident  caused 
the  writers  to  remark  on  Biddle's  shrewdness  as  a 
banker.  He  could  always  offer  a  logical  reason  for 
the  policy  pursued,  and  his  essays  on  banking  show 


THE  STORY  OF  A  BANK  87 

he  was  well  acquainted  with  his  profession.  Of 
particular  interest  to  students  are  his  observations 
on  a  mixed  currency,  and  of  the  methods  of  expanding 
and  contracting  paper  issues  in  consonance  with  the 
outgo  or  income  of  coin.  The  perusal  of  these 
papers  gives  an  intimate  view  of  the  hazardous 
nature  of  banking  under  those  conditions. 

The  period  has  now  been  reached  of  the  beginning 
of  the  Bank's  troubles.  It  has  been  a  custom  for 
those  who  attempt  to  justify  President  Jackson's 
destructive  war  on  the  United  States  Bank  to  reiter- 
ate the  assertion  that  it  was  unsound;  that  the  Presi- 
dent believed  it  was  corrupt  and  unsafe;  that  reports 
to  the  contrary  by  committees  of  Congress  were 
"whitewashes,"  influenced  by  the  relations  of  many 
congressmen  with  the  Bank.  These  assertions  have 
continually  been  made  to  support  a  policy  adhered 
to  by  a  party  whose  patron  saint  is  distinguished 
mainly  for  his  ruthless  use  of  arbitrary  power.  They 
are  in  conflict  with  clear  historical  evidence,  and 
reflect  the  temper  of  a  partisanship  more  loyal  to 
tradition  than  to  consistency. 

The  only  fact  that  can  be  distorted  to  give  the 
color  of  truth  to  such  assertions  is  that  the  Bank  was 
finally  discovered  to  be  insolvent.  But  that  was 
nine  years  after  Jackson's  first  attack  on  it,  six  years 
after  he  had  forced  the  removal  of  the  Government 
deposits,  and  long  after  it  had  ceased  to  be  a  national 
bank.  The  questions  are,  whether  the  Bank  was 
sound  and  pursuing  its  legitimate  course  in  a  legi- 


88  THE  STORY  OF  A  BANK 

timate  way  at  the  time  the  assaults  against  it  began 
— whether  the  President  could  have  known  of  any- 
thing to  warrant  those  assaults;  and  further,  whether 
the  continued  attacks  on  its  good  name  and  credit 
had  anything  to  do  with  causing  its  downfall. 

It  must  be  admitted — official  records  prove  it — 
that  the  Government  was  making  gain  out  of  the 
Bank  and  enjoying  other  solid  advantages  from  it 
when  the  war  was  started.  We  have  abundant  his- 
torical evidence  that  the  currency  was  then  sound, 
and  we  have  already  noted  Gallatin's  favorable 
comment  on  the  branch  drafts,  the  most  criticised 
feature  of  its  operations,  showing  that  while  their 
use  proved  an  error  it  had  the  sanction  of  able  minds. 
Its  losses  caused  by  fraudulent  control  during  the 
first  three  years  had  been  made  up.  If  it  had  not 
effected  absolute  uniformity  in  the  circulating  me- 
dium it  had  done  so  substantially;  specie  payments 
had  been  well  sustained  for  years;  not  a  business  man 
anywhere  questioned  its  safety  nor  the  fact  that  it 
was  a  substantial  check  on  the  reckless  inclination  of 
the  local  banks.  And  the  great,  overtopping  fact  is, 
that  during  the  years  from  1830,  onward  to  the 
removal  of  the  deposits,  the  country  was  properous, 
with  Government  and  mercantile  finances  in  a  happy 
condition,  as  they  had  been  with  a  slight  interruption 
in  1825  from  the  time  of  its  resuscitation  from  the 
acts  of  its  plunderers,  about  1821. 

Before  these  most  weighty  truths  it  profits  little 
to  quibble  about  whether  the  Bank  in  all  the  details 


THE  STORY  OF  A  BANK  89 

of  its  vast  operations  pleased  everybody's  notions, 
or  committed  errors  of  judgment,  or  indeed  whether 
it  had  committed  any  technical  violation  of  its  charter 
such  as  usury,  as  was  claimed,  through  its  charges  for 
discounts  and  domestic  exchange  together.  It  must 
at  the  outset  be  determined  whether  there  was 
any  grounds  at  the  time  to  justify  a  policy,  not  only  of 
attack  but  of  extermination;  for  no  intelligent  person 
not  obsessed  with  prejudice  can  study  the  evidence 
in  the  case  without  being  convinced  that  the  deter- 
mination from  the  start  was  that  the  Bank  should 
either  become  a  subservient  ally  of  the  dominant 
party  or  be  driven  out  of  existence.  There  is  no 
utterance  by  Jackson,  or  any  of  his  abettors,  in  the 
matter,  that  they  desired  to  effect  any  reforms,  to 
correct  methods  in  banking,  of  which  they  disapprov- 
ed. It  was  a  conspiracy  as  obvious,  as  far  from  the 
possibility  of  doubt,  as  any  related  in  history,  to 
control  or  wreck  the  greatest  financial  institution  on 
the  continent  in  the  interests  of  a  political  faction. 
How  far  the  motive  of  revenge  entered  into  the  pro- 
ceedings is  not  so  certain.  Some  authorities  have 
doubted  whether  Jackson  had  the  destruction  of  the 
Bank  in  mind  when  he  entered  the  Presidency.  They 
question  whether  if  he  had  he  would  have  selected 
a  Secretary  of  the  Treasury  from  the  State  in  which 
the  Bank  was  located.  And  they  fail  to  discover 
anything  in  his  previous  experience  that  would  have 
inspired  him  to  such  a  course.  In  an  earlier  day  he 
had  been  put  to  some  inconvenience  by  the  branch 


90  THE  STORY  OF  A  BANK 

at  New  Orleans  refusing  to  cash  a  draft  for  him; 
but  this  is  dismissed  as  too  trivial  to  consider.  That 
may  be,  yet  nothing  is  better  known  than  that  Jack- 
son had  a  good  memory  for  those  who  crossed  him  and 
failed  to  make  amends.  It  is  known  that  in  1827 
he  opposed  the  repeal  in  Tennessee  of  the  law 
taxing  the  Bank's  branches  there,  and  that  he 
then  expressed  hatred  of  the  Bank.  On  the  word 
of  James  K.  Polk,  he  was  dissuaded  by  friends  from 
attacking  the  Bank  in  his  inaugural  Message.  It 
seems  reasonable  to  suppose  that  he  had  some  of  the 
antipathy  toward  the  institution  common  to  the 
region  of  his  home,  and  that  this  feeling  was  easily 
intensified  by  stories  of  the  Bank  using  its  influence 
against  him  or  his  party.  Amos  Kendall,  fourth 
auditor  of  the  Treasury,  and  F.  P.  Blair,  editor  of  the 
Globe,  both  were  full  of  anti-Bank  venom;  both  were 
close  in  Jackson's  confidence,  and  the  Globe  was  the 
administration  organ.  The  former  we  have  seen 
absorbing  it  in  Kentucky  at  the  time  he  was  aiding, 
with  his  peculiar  talents,  the  Legislature  in  its  efforts 
to  override  the  courts.  That  Kendall  was  a  vindic- 
tive, narrow-minded  partisan  is  as  certain  as  that 
he  had  administrative  ability.  He  had  been  an 
advocate  in  Kentucky  of  the  power  of  the  States 
to  tax  the  branches  of  the  Bank  within  their  borders ; 
when  the  Supreme  Court  declared  they  had  not, 
he  never  forgave  humanity  for  it,  and  thereafter 
indulged  his  grudge  against  the  Bank.  He  now 
declared  that  the  branch  at  Lexington  had  used  its 


THE  STORY  OF  A  BANK  91 

powers  in  a  political  campaign.  When  called  before 
a  Congressional  committee  to  give  evidence  it  was 
only  hearsay.  He  had  no  personal  knowledge  of  such 
a  thing,  and  yet  his  talk  served  as  a  part  of  the 
"stock"  testimony  unfavorable  to  the  Bank.  Ken- 
dall's charges  were  disproved  by  residents  of  Ken- 
tucky, besides  which  the  president  and  seven  out  of 
eight  of  the  surviving  directors  of  the  Lexington 
branch,  published  affidavits  denying  that  their  bank 
had  ever  contributed  to  the  funds  of  any  political 
party.  Nevertheless,  it  is  likely  that  his  assertions 
influenced  the  President,  who  found  Kendall  a  useful 
instrument  at  every  stage  of  the  contest. 

Blair  was  a  bankrupt  politician  from  Kentucky, 
full  of  heresies,  economic  and  political.  He  had 
once  owed  the  branch  at  Lexington  $20,744,  which 
he  defaulted  on,  and  finally  settled  by  paying  $2,237. 
This  should  be  remembered  when  he  is  heard  thun- 
dering against  the  Bank  as  a  despoiler  of  the  people. 

Whether  it  was  the  personal  enmity  that  a  few 
men  felt,  or  that  they  were  actuated  by  a  conviction 
of  factional  necessity,  or  merely  that  they  deliber- 
ately calculated  the  political  value  of  the  Bank  as  an 
active  force  allied  with  them  in  partisan  warfare;  or 
in  default  of  that,  the  popularity  of  waging  war  on 
it  before  the  people,  the  fact  that  they  secretly 
plotted  together  for  its  control  or  destruction,  is 
indubitable,  as  is  the  further  fact  that  they  began  the 
action  with  all  the  art  of  finished  conspirators. 

Benton,a  stanch  defender  of  Jackson's  course.in  his 


92  THE  STORY  OF  A  BANK 

voluminous  writing  on  the  subject,  did  not  attempt 
to  disguise  the  fact  that  Jackson  began  the  contest 
with  the  intention  of  destroying  the  Bank,  nor  of  his 
own  hearty  approval  of  that  object,  the  ultimate 
purpose  being  the  deposit  of  the  public  funds  in  local 
banks  "in  the  interest  of  the  Government" — which 
meant  nothing  but  the  political  advantages  of  the 
Jackson  party. 

There  was  a  slight  rumble  of  the  approaching 
storm  early  in  1828,  when  P.  P.  Barbour  introduced  a 
resolutiin  in  the  House  recommending  that  the 
Government  should  sell  its  shares  in  the  Bank.  It  is 
illustrative  of  the  favorable  feeling  there  was  in 
Congress  at  that  date  that  the  resolution  was  defeated 
174  to  29.  It  is  indicative  also  of  the  feeling  in  the 
business  community.  There  were  still  a  few  old-time 
sticklers  about  the  constitutionality  of  the  Bank,  but 
this  question  had  ceased  to  be  a  live  one. 

In  January,  1829,  just  after  Jackson's  election,  the 
Postmaster  General,  John  McLean,  informed  Biddle 
that  he  had  received  reports  from  several  Con- 
gressmen, complaining  that  the  officers  of  the  Ken- 
tucky branches  of  the  Bank  had  been  interfering  in 
politics.  It  was  suggested  that  to  avoid  such  unfair 
influence,  directors  of  the  branches  should  be  chosen 
equally  from  both  political  parties.  R.  M.  Johnson, 
of  Kentucky,  furnished  a  list  of  Jackson  henchmen  in 
that  state  who  were  recommended  as  eligible  and 
fit  for  such  positions. 

Biddle  answered  that  the  Bank's  appointees  were 


THE  STORY  OF  A  BANK  93 

not  chosen  from  political  consideration,  and  repudi- 
ated the  idea  of  a  system  of  "political  balance,"  as 
being  sure  to  foist  upon  the  Bank  "incompetent  or 
inferior  persons."  He  warned  the  officers  of  the 
Kentucky  branches  to  desist  from  political  action, 
and  received  their  assurance  that  they  had  not  given 
any  cause  for  the  charges.  They  also  declared  that 
the  "eligibles"  furnished  by  Johnson  were  unfit  for 
positions  about  a  bank,  and  designed  merely  to  make 
of  the  branches  political  machines.  The  cashier  at 
Louisville  declared  that  there  was  a  scheme  to  make 
a  Jackson  partisan  president  of  that  branch.  There 
is  supporting  testimony  that  the  sins  of  the  branch 
bankers  were  rather  of  omission  than  commission — 
omission  of  actively  helping  to  elect  Jackson.* 

And  we  have  this  testimony  from  another  authority 
who  knows  whereof  he  speaks:  "In  the  presidential 
campaigns  of  1824  and  1828,  the  Bank  was  not  men- 
tioned. In  all  the  political  pamphlets,  volumes,  news- 
papers, campaign  papers,  burlesques  and  caricatures 
of  those  years  there  is  not  the  most  distant  allusion  to 
the  Bank  as  a  political  issue." — Knox's  History  of 
Banking.  p61. 

It  is  worth  mention  that  the  cashier  of  the  Nash- 
ville branch,  appointed  in  1818,  through  the  recom- 
mendation of  Andrew  Jackson,  proved  recreant. 
Under  his  management  and  connivance  there  were  the 
most  reprehensible  operations  of  any  of  the  branches, 
next  to  Baltimore. 


"Catterall  p.  177. 


94  THE  STORY  OF  A  BANK 

Jackson  was  inaugurated  March  4,  1829.  In 
June  of  that  year  his  Secretary  of  the  Treasury, 
Samuel  D.  Ingham,  addressed  a  letter  to  Biddle,  the 
president  of  the  Bank,  enclosing  one  from  Senator 
Levi  Woodbury  of  New  Hampshire.  In  this  letter 
Woodbury  entered  a  complaint  against  Jeremiah 
Mason,  recently  installed  president  of  the  branch 
at  Portsmouth,  N.  H.  One  of  the  charges  against 
Mason  was  his  brusqueness  of  manner,  another  was 
his  insistence  on  punctuality  in  payments  to  the  Bank 
when  due.  It  was  also  alleged  that  Mason  showed 
partiality  in  granting  discounts,  intimating  that 
political  preference  had  something  to  do  with  it. 

Ingham  in  his  letter  commented  on  the  enclosure  to 
the  effect  that  it  was  common  notoriety  that  all  the 
banks  were  political,  admitting,  however,  that  such 
complaints  emanated  from  all  parties.  Biddle  made 
an  investigation  of  the  matter,  and  in  one  of  the 
several  letters  he  wrote  Ingham  during  the  next  few 
months,  stated  that  the  branch  at  Portsmouth  had 
previously  been  badly  managed;  that  Mason  had 
been  appointed  as  a  competent  banker  and  lawyer  to 
bring  about  necessary  reforms  there;  and  that  as  his 
unpopularity,  as  regarded  manners  and  collections, 
was  as  great  with  members  of  one  party  as  another, 
it  could  not  be  because  of  any  political  activity,  but 
merely  because  the  people  objected  to  punctual 
banking  methods.  No  doubt  some  had  hoped  for 
favors  on  the  ground  of  political  sympathy  as  they 
might  have  been  accustomed  to,  and  not  getting 
them,  had  complained. 


THE  STORY  OF  A  BANK  95 

But  Ingham  did  not  choose  to  consider  this  an 
adequate  explanation.  In  his  next  letter  to  Biddle 
he  maintained  there  must  be  just  grounds  for  com- 
plaint, and  ventured  the  significant  statement  that 
exemption  from  party  preferences  in  conducting  a 
bank  was  impossible;  adding  as  significantly  that 
this  was  the  view  of  the  administration.  This  letter 
is  a  most  important  one  in  the  documentary  evidence 
of  the  Bank  war.  It  has  since  been  construed  by  the 
most  able  commentators  as  an  insidious  attempt  to 
draw  Biddle  into  damaging  confessions,  which  would 
furnish  the  administration  material  for  some  more 
tangible  charges.  Biddle  visited  the  Buffalo  and 
Portsmouth  branches  during  the  summer,  and  seems 
to  have  made  a  careful  inquiry  of  the  circumstances 
surrounding  them;  and  also  sought  to  inform  himself 
as  to  other  branches  through  demands  for  reports 
from  their  officers,  showing  thereby  a  genuine  desire 
to  know  whether  any  political  influence  was  being 
exerted  by  them,  or  any  favors  shown  on  political 
grounds.  He  so  informed  Ingham  in  a  letter,  Sep- 
tember 15,  and  in  answer  Ingham  exposes  something 
very  much  like  duplicity  by  pretending  to  be  sur- 
prised that  Biddle  could  have  so  misunderstood  him; 
charged  him  with  perverting  his  statements,  and 
calls  his  denials  that  the  Bank  ever  made  or  with- 
held a  loan  for  political  reasons  "too  confident  if  not 
presumptuous." 

This  attack  on  Mason  grew  out  of  the  enmity 
between  him  and  Woodbury,  as  Knox  clearly  shows. 


96  THE  STORY  OF  A  BANK 

The  two  had  been  political  opponents,  and  back  in 
1825,  Mason  had  come  very  near  being  elected  to  the 
United  States  Senate.  Woodbury  defeated  him  by 
intrigue,  it  is  alleged,  and  the  animosity  then  engen- 
dered had  not  abated.  In  his  fight  on  Mason, 
Woodbury  was  now  killing  two  birds  at  a  throw — 
serving  Jackson  and  working  off  an  old  grudge. 

At  about  this  time  Biddle  informed  Ingham  that 
he  had  received  two  memorials  from  Isaac  Hill, 
second  Comptroller  of  the  Treasury,  and  a  Jackson 
henchman.  One  of  these  memorials  came  from  the 
business  men  of  Portland,  and  the  other  from  sixty 
members  of  the  Legislature  of  New  Hampshire, 
requesting  Mason's  removal,  and  nominating  a  board 
of  directors,  "friends  of  General  Jackson  in  New 
Hampshire."  It  will  be  remembered  that  Hill  was 
from  New  Hampshire,  and  was  as  pestiferous  a 
politician  as  any  of  that  day.  His  activity  is  shown 
in  the  fact  that  he  also  induced  the  Secretary  of  War 
to  order  a  removal  of  the  pension  agency  from  the 
Portsmouth  branch  to  a  bank  at  Concord,  of  which 
he,  himself,  had  been  president.  The  attempt  of  the 
community  to  dictate  not  only  who  should  be  presi- 
dent, but  also  the  board  of  directors  of  the  branch 
bank,  and  further  that  they  should  be  of  the  Jackson 
faction,  is  curiously  illustrative  both  of  the  popular 
ideas  about  the  nature  of  a  bank,  and  of  the  offensive 
partisan  work  of  Jackson's  official  appointees. 

Any  one  who  would  comprehend  the  despicable 
political  character  of  these  movements  and  deliberate 


THE  STORY  OF  A  BANK  97 

attempts  to  use  the  Bank  for  political  advantage, 
cannot  dismiss  these  instances  lightly.  The  attempt- 
ed removal  of  the  pension  funds  was  lawless,  as 
Biddle  pointed  out  in  his  protest,  and  the  order  of  the 
Secretary  of  War  was  revoked.  But  as  has  been 
observed  by  a  distinguished  writer,  there  was  a 
co-ordination  about  these  numerous  attacks,  both 
insidious  and  bold,  which  makes  them  look  as  if  they 
had  been  planned  by  the  clique  at  Washington.  One 
can  hardly  read  Ingham's  second  letter  to  Biddle 
without  the  feeling  that  it  was  a  deliberate  attempt  at 
political  blackmail;  if  they  should  find  him  approach- 
able and  pliable  they  would  use  him  to  advantage. 
To  convince  him  that  he  was  not  toying  with  harm- 
less instruments,  they  began  their  worrying  tactics. 
He  was  not  the  most  self-contained  man,  and  he 
finally  returned  some  pretty  sharp  letters  rebuking 
their  inuendo.  In  a  straight-forward  way  he  denied 
that  public  opinion  around  a  bank  is  any  test  of  the 
quality  of  its  management,  and  declared  that  the 
reported  opinion  at  Portsmouth  upon  examination, 
"degenerated  into  the  personal  hostility  of  a  very 
limited  and  for  the  most  part,  very  prejudiced  circle." 
He  then  takes  up  three  points  suggested  in  Ingham's 
letter:  1.  That  the  Secretary,  by  virtue  of  the  rela- 
tions of  the  Government,  has  some  supervision  over 
the  choice  of  officers  of  the  Bank.  2.  That  there 
is  some  action  of  the  Government  on  the  Bank  which 
is  not  precisely  defined,  but  of  which  the  Secretary 
is  the  proper  agent.  3.  That  it  is  the  right  and  duty 


98  THE  STORY  OF  A  BANK 

of  the  Secretary  to  make  known  to  the  president  of 
the  Bank  the  views  of  the  administration  on  the 
political  opinions  of  the  officers  of  the  Bank.  To  these 
Biddle  rejoined  that  the  board  of  directors  of  the 
Bank  acknowledged  no  responsibility  whatever  to 
the  Secretary  in  regard  to  the  political  opinions  of  the 
officers  of  the  Bank.  That  the  Bank  was  responsible 
to  Congress  only,  and  was  carefully  shielded  by  its 
charter  from  political  control.  Indignantly  denied 
that  freedom  from  political  bias  in  bank  management 
is  impossible,  and  showed  the  folly  of  the  notion  of 
political  "checks"  and  "counter-balances"  between 
the  officers  of  the  Bank,  and  declared  that  the  Bank 
ought  to  disregard  all  parties. 

The  three  suggestions  from  Ingham  showed  de- 
praved political  ideas  and  motives,  and  it  was  not 
intended  to  leave  any  doubt  that  he  was  speaking  for 
his  master.  They  carried  covert  threats  of  persecu- 
tion, and  were  in  effect  the  announcement  of  the 
administration  to  the  president  of  the  Bank,  that  he 
must  yield  to  their  dictates  in  mixing  banking  with 
politics;  that  is,  that  the  Bank  must  become  an 
instrument  of  the  administration  or  be  regarded  by 
the  latter  as  a  dangerous  enemy. 

Biddle's  answers  were  manly  and  to  the  point,  and 
it  would  not  have  affected  the  situation  if  he  had 
been  more  discreet.  He  was  a  ready  writer,  and  has 
generally  been  criticised  as  having  used  his  pen  with- 
out prudent  restraint  in  this  correspondence.  But 
he  told  the  truth  and  "he  would  have  won  a  complete 


THE  STORY  OF  A  BANK  99 

victory  on  the  argument  of  his  points  if  he  had  been 
before  an  impartial  tribunal,  but  he  stung  Ingham's 
vanity  and  on  the  main  issue  he  delivered  himself 
into  the  hands  of  his  enemies."  (Sumner) 

It  is  the  fair  verdict  of  impartial  writers  that 
Ingham  was  a  hypocrite.  In  his  last  letter  to  Biddle 
he  put  on  an  injured  front,  claiming  that  he  was 
forced  to  defend  himself  from  the  charge  of  trying 
to  seduce  the  Bank  into  political  relations  with  the 
administration.  Said  he  had  claimed  that  if  the 
Bank  abused  its  powers,  the  Secretary  could  remove 
the  Government  deposits;  declared  the  Bank  was 
"exclusively  for  national  purposes  and  for  the  com- 
mon benefit  of  all,  and  that  private  employment  is 
only  an  incident — perhaps  an  evil  one — founded  on 
mere  convenience  for  care  and  management." 
Strange  assertions  coming  from  one  of  his  standing — 
that  the  Bank  had  been  organized  only  to  transact 
Government  business,  and  that  other  matters  were 
incidental.  If  his  letters  to  Biddle  has  shown  a 
depth  of  hypocrisy,  this  showed  the  shallowness  of 
his  understanding — assuming  that  he  was  not 
practicing  hypocrisy  here,  too. 

If  there  could  remain  any  doubt  of  Ingham's 
duplicity  it  would  have  to  give  way  before  the  evi- 
dence of  his  own  utterance.  "After  he  (Ingham)  left 
the  Treasury  he  confessed  that  the  members  of  the 
'kitchen  cabinet'  used  to  abuse  the  trusting  ear  of 
Jackson  with  terrible  tales  of  the  corrupt  influence 
the  Bank  was  exerting  in  controlling  elections  in 
opposition  to  him." — Knox,  p  67. 


100  THE  STORY  OF  A  BANK 

These  cumulative  attacks  from  the  Jackson 
adherents  of  Kentucky,  from  Ingham,  from  Hill, 
from  Woodbury  and  his  Jackson  clan  in  New  Hamp- 
shire, from  Kendall,  Fourth  Auditor  of  the  Treasury, 
from  the  Secretary  of  War  and  the  Commissioner 
of  Pensions,  coming  in  such  sequence  as  to  leave  no 
doubt  of  their  prearrangement,  convinced  Biddle 
and  the  directors  of  the  Bank,  that  there  was  a  con- 
certed movement  to  convert  it  into  a  Jackson  party 
machine. 

Biddle's  final  reply  to  Ingham  indicates  that  he  was 
frightened  at  last.  His  letter  was  in  a  more  friendly 
strain,  and  only  to  the  effect  that  it  was  the  policy  of 
the  Bank  to  keep  out  of  politics.  He  was  probably 
not  surprised  when  Jackson  fired  his  first  shot  at 
the  Bank  in  his  message  of  December,  1829.  In  this 
the  President  observed  that  the  charter  of  the  Bank 
would  expire  in  1836,  and  that  the  question  of  renew- 
al could  not  too  soon  be  brought  before  Congress 
and  the  people.  "Both  the  constitutionality  and 
expediency  of  the  law  creating  the  Bank,  are  well 
questioned  by  a  large  portion  of  our  fellow  citizens, 
and  it  must  be  admitted  by  all  that  it  has  failed  in  the 
great  end  of  establishing  a  uniform  and  sound  curren- 
cy. Under  these  circumstances,  if  such  an  institu- 
tion is  deemed  essential  to  the  fiscal  operations  of  the 
Government,  I  submit  to  the  wisdom  of  the  Legis- 
lature whether  a  national  one,  founded  upon  the 
credit  of  the  Government  and  its  revenues,  might  not 
be  devised,  which  would  avoid  all  constitutional 


THE  STORY  OF  A  BANK  101 

difficulties  and  at  the  same  time  secure  all  the  advan- 
tages to  the  Government  and  the  country  that  were 
expected  to  result  from  the  present  Bank." 

It  is  not  an  agreeable  task  to  question  Jackson's 
sincerity,  but  it  is  not  overstepping  the  bounds  of 
criticism  to  say,  that  this  utterance  was  unworthy  of 
a  man  of  his  exalted  position.  Clearly,  it  was  the 
"kitchen  cabinet"  speaking  through  his  message.  It 
was  neither  a  strict  observation  of  truth  with  regard 
to  the  doubtful  constitutionality  of  the  Bank,  nor 
of  its  effects  on  the  currency;  while  the  vague  but 
startling  proposition,  that  the  Government  should 
start  a  bank  on  its  revenues  showed  a  remarkable 
confusion  of  ideas  on  the  subject. 

In  regard  to  the  President's  statements,  Professor 
Sumner  says:  "Statistics  exist  which  show  the  value 
of  the  currency  in  different  parts  of  the  country  for 
every  year  from  1814.  These  show  that  the  currency 
had  steadily  grown  toward  uniformity  at  par  of  specie 
from  1819  to  1829.  No  person  living  could  remem- 
ber when  the  currency  had  been  as  good  as  it  then  was 
including  that  of  the  new  States.  So  much  as  to  the 
matter  of  fact;  as  to  the  matter  of  opinion,the  correct- 
ness of  which  is  open  to  doubt,  there  was  scarcely 
anybody  amongst  the  classes  conversant  with  affairs 
who  did  not  believe  that  the  Bank  of  the  United 
States  was  to  be  credited  with  having  brought  about 
this  state  of  things." 

The  vague  and  confused  proposition  of  the  Presi- 
dent about  a  bank  "founded  upon  the  credit  of  the 


102  THE  STORY  OF  A  BANK 

Government  and  its  revenues"  very  naturally  caused 
alarm.  It  was  feared  that  he  had  in  view  something 
like  the  State  bank  paper-making  machines.  The 
stock  of  the  Bank  dropped  from  125  to  116,  as  it  was 
suspected  the  President  knew  something  unfavorable 
about  it.  As  to  the  "question"  of  the  Bank's  con- 
stitutionality, the  impudence  of  the  assertion  on  this 
point  will  be  found  exposed  in  the  House  report 
following. 

That  part  of  the  Message  relating  to  the  Bank  was 
referred  to  the  Committee  on  Ways  and  Means, 
which  consisted  of  McDuffie,  Verplanck,  Dwight, 
Smyth,  Ingersol,  Gilmore  and  Overton — fairly 
representative  of  all  sections  and  both  parties.  The 
Committee  gave  the  task  of  formulating  a  report 
to  McDuffie,  as  the  member  best  equipped  on  the 
subject  of  banking.  The  report  of  this  South  Caro- 
lina democrat  is  voluminous,  exhaustive,  and  is 
recognized  as  an  exceptionally  able  state  paper.  It 
should  be  remembered  that  this  was  before  the 
nullification  trouble,  and  that  McDuffie,  while  expos- 
ing the  folly  of  the  President's  utterances,  expressed 
the  most  sincere  personal  regard  for  him.  Enough 
will  be  quoted  from  this  masterly  report  to  show  what 
was  thought  of  Jackson's  sentiments  toward  the 
Bank  by  some  of  the  leaders  of  his  own  party — in 
fact  the  large  majority  at  that  time. 

"When  the  charter  (of  the  first  United  States 
Bank)  expired  in  1811,  Congress  refused  to  renew  it, 
principally  owing,  as  the  Committee  believe,  to  the 


THE  STORY  OF  A  BANK  103 

then  existing  state  of  political  parties.  Soon  after 
that  bank  was  chartered,  the  two  great  parties  that 
have  since  divided  the  country,  began  to  assume  an 
organized  existence.  Mr.  Jefferson  and  Mr.  Madi- 
son, the  former  in  the  executive  cabinet  and  the 
latter  in  Congress,  had  been  opposed  to  the  establish- 
ment of  the  bank  on  constitutional  grounds,  and  be- 
ing placed  at  the  head  of  the  party  most  unfavorable 
to  the  extension  of  the  powers  of  the  Government 
by  implication,  the  bank  came  to  be  regarded  as  in 
some  degree  the  test  of  political  principle. 

"When  Mr.  Jefferson  came  into  power  on  the  strong 
tide  of  political  revulsion  the  odium  of  the  Alien  and 
Sedition  laws  was  in  part  communicated  to  the  (first) 
Bank  of  the  United  States ....  and  it  was  discussed 
as  a  party  question. 

"In  less  than  three  years  after  the  expiration  of  the 
charter,  the  war  with  Great  Britain  having  taken 
place  in  the  meantime,  the  circulating  medium 
became  so  disordered,  the  public  finances  so  deranged 
and  the  public  credit  so  impaired,  that  the  enlight- 
ened patriot,  Mr.  Dallas,  who  then  presided  over  the 
Treasury  Department,  with  the  sanction  of  Mr. 
Madison,  and  as  it  is  believed,  every  member  of  the 
Cabinet,  recommended  to  Congress  the  establish- 
ment of  a  national  bank  as  the  only  measure  by  which 
the  public  credit  could  be  revived  and  the  fiscal  re- 
sources of  the  Government  redeemed  from  a  ruinous 
and  otherwise  incurable  embarrassment  ;and  such  had 
been  the  impressive  lesson  taught  by  the  very  brief, 


104  THE  STORY  OF  A  BANK 

but  fatal  experience,  that  the  very  institution,  which 
had  been  so  recently  denounced  and  rejected  by  the 
Republican  party,  being  now  recommended  by  a 
Republican  Administration,  was  carried  through 
both  branches  of  Congress ....  by  an  overwhelming 
majority,  notwithstanding  the  decided  opposition  of 
all  the  State  banks  and  their  debtors;  and  indeed  the 
whole  debtor  class.  .  .  .Since  the  adoption  of  the 
Constitution  a  bank  has  existed  under  authority  of 
the  Federal  Government  for  33  out  of  45  years, 
during  which  time  public  and  private  credit  have 
been  maintained  at  an  elevation  fully  equal  to  what 
has  existed  in  any  nation  in  the  wrorld;  whereas  in  the 
two  short  intervals,  during  which  no  national  bank 
existed,  public  and  private  credit  were  greatly  impair- 
ed, and,  in  the  latter  instance,  the  fiscal  operations  of 
the  Government  were  almost  entirely  arrested .... 

"But  it  is  impossible  to  exhibit  anything  like  a  just 
view  of  the  beneficial  operations  of  the  Bank,  without 
adverting  to  the  great  reduction  it  has  effected  and 
the  steadiness  it  has  superinduced  in  the  rate  of  the 
commercial  exchanges  of  the  country.  Though  this 
branch  of  the  business  of  the  Bank  has  been  the 
subject  of  more  complaint,  perhaps,  than  any  other, 
the  Committee  have  no  hesitation  in  saying  it  has 
been  productive  of  the  most  signal  benefits  to  the 
country,  and  deserves  the  highest  commendation."  * 

The  Report  then  took  up  other  matters  that  had 
been  the  subject  of  criticism,  As  to  foreign  interests, 

*Doc.  Hist. 


THE  STORY  OF  A  BANK  105 

foreigners  owned  $7,000,000,  or  one-fifth  of  the  capi- 
tal. As  to  its  being  a  power  of  the  wealthy,  it  was 
true  that  $2,000,000  of  the  stock  owned  in  the  United 
States,  was  owned  by  persons  holding  over  $100,000 
each.  But  persons  holding  less  than  $5,000  each 
held  $4,682,000  of  the  shares;  persons  having  between 
$5,000  and  $10,000  each,  held  over  $3,000,000,  while 
nearly  $6,000,000  was  held  by  trustees  and  guardians 
for  females,  orphans,  and  charitable  and  other 
institutions.  Only  $3,453,000  was  now  held  by  the 
original  owners,  the  rest  having  been  purchased  at 
the  market  price,  or  greatly  above  par.  Yet  some 
claimed  that  to  renew  the  charter  would  be  equiva- 
lent to  a  grant  to  the  rich  of  the  amount  above  par — 
some  20%. 

"To  destroy  the  existing  Bank,  therefore,  after  it 
had  rendered  such  signal  service  to  the  country, 
merely  with  a  view  to  create  another,  would  be  an 
act  of  cruelty  and  caprice,  rather  than  of  justice  and 
wisdom,  as  it  regards  the  present  stockholders.  It 
is  no  light  matter  to  depreciate  the  property  of 
individuals,  honestly  obtained  and  usefully  employed, 
to  the  extent  of  $5,600,000,  and  the  property  of  the 
Government  to  the  extent  of  $1,400,000,  purely  for 
the  sake  of  change.  It  would  indicate  a  fondness  for 
experiment  which  a  wise  Government  will  not  indulge 
upon  slight  consideration. 

"But  the  great  injury  which  would  result  from  the 
refusal  of  Congress  to  re-charter  the  present  Bank 
would,  beyond  all  question,  be  that  which  would 


106  THE  STORY  OF  A  BANK 

result  to  the  community  at  large.  It  would  be 
difficult  to  estimate  the  extent  of  the  distress  which 
would  naturally  and  necessarily  result  from  the  sud- 
den withdrawal  of  more  than  $40,000,000  of  credit, 
which  the  community  now  enjoys,  from  the  Bank. 
But  this  would  not  be  the  full  extent  of  the  operation. 
....  The  pressure  on  the  active  industries  and  enter- 
prising classes  who  depend  most  on  the  facilities  of 
the  Bank  credit  would  be  tremendous." 

Thus  it  is  shown  that  both  the  President's  insinua- 
tions and  statements  concerning  the  bank  were 
entirely  unwarranted.  In  addition  to  what  has 
been  given,  it  should  be  said  that  the  Supreme  Court 
of  the  United  States  had  upheld  the  constitutionality 
of  the  bank  in  the  case  of  McCulloch  vs.  Maryland  in 
1819,  and  again  in  the  case  of  Osborn  et  al  v.  the 
Bank  in  Ohio,  besides  several  other  cases  that  could 
be  quoted.  So  here  we  have  it  that  the  doubt  of 
unconstitutionality  had  been  set  aside  by  both 
political  parties,  and  the  legality  of  the  charter 
sustained  by  the  highest  court  in  the  land;  yet  in  the 
face  of  all  this  the  President  talks  about  the  Bank's 
unconstitutionality  being  well  questioned  by  a  "large 
portion"  of  the  citizens.  It  is  in  keeping  with  the 
lack  of  respect  for  authority  that  was  characteristic 
of  that  period. 

It  is  worth  while  to  contrast  the  excerpts  from  the 
McDuffie  report  with  the  literature  emanating 
from  the  anti-Bank  clique,  such  as  the  Ingham  letters 

*Doc.  Hist. 


THE  STORY  OF  A  BANK  107 

and  even  those  parts  of  the  President's  messages 
dealing  with  the  Bank.  It  proves  how  hollow  and 
unreasonable  were  the  objections  they  raised.  One 
is  forced  to  consider,  too,  that  McDuffie's  forecast  of 
the  injury  that  would  be  worked,  should  the  Bank  be 
refused  a  new  charter,  describes  just  what  did  happen 
a  few  years  later.  But  McDuffie  went  further  in 
his  tribute  to  the  Bank : 

"It  is  but  justice  also  to  remark  that  the  direction 
of  the  mother  Bank  appears  to  have  abstained,  with 
scrupulous  care,  from  bringing  the  power  and  in- 
fluence of  the  Bank  to  bear  upon  the  political  ques- 
tions, and  to  have  selected  for  the  various  branches, 
business  men,  in  no  way  connected  with  party  poli- 
tics." And  this  should  be  contrasted  with  the  claims 
that  the  President  was  making  through  Ingham,  Ken- 
dall and  others  concerning  the  political  interference 
of  the  Bank. 

The  most  cutting  part  of  McDuffie's  report,  huw- 
ever,was  that  wherein  it  paid  its  respects  to  Jackson's 
recommendations  for  some  kind  of  a  national  bank 
for  which  the  people  should  be  taxed.  So  far  as  the 
recommendation  could  be  understood,  it  was  for 
making  an  engine  for  political  patronage  in  the  small 
army  of  employes,  and  the  dispensation  of  bank  ac- 
commodations to  the  standing  amount  of  at  least 
$50,000,000.  "The  mind  almost  instinctively  shrinks 
from  the  contemplation  of  an  idea  so  ominous  to 
purity  of  the  Government  and  the  liberties  of  the 
people.  No  government  of  which  the  committee  has 


108  THE  STORY  OF  A  BANK 

knowledge,  except  perhaps  the  despotism  of  Russia, 
was  ever  invested  with  a  patronage  at  once  so  prodi- 
gious in  its  influence,  and  so  dangerous  in  its  charac- 
ter....  If  the  whole  patronage  of  the  English 
monarchy  were  centered  in  the  hands  of  the  Ameri- 
can executive,  it  may  be  well  doubted  whether  the 
public  liberties  would  be  so  much  endangered  by  it  as 
it  would  be  by  this  vast  pecuniary  machine,  which 
would  place  in  the  hands  of  every  administration 
$50,000,000,  as  a  fund  for  rewarding  political  parti- 
sans   and  would  not  the  Treasury  of  the  United 

States  under  the  sanctifying  influence  of  party 
delusion  and  party  infatuation,  be  literally  plundered 
by  mercenary  retainers,  bankrupts  in  fortune,  and 
adventurers  in  politics!" 

One  can  only  imagine  what  Jackson  said  or  thought 
on  reading  this.  He  is  quoted  as  having  pronounced 
the  whole  report  as  "feeble."  But  no  sensible  man 
can  doubt  that  it  outlined  just  such  a  situation  as 
the  stubborn-minded  President  had  in  view,  and  that 
indirectly  it  exposed  the  motives  that  underlay  the 
whole  Bank  opposition.  One  is  led  to  wonder  at  its 
duplicity  all  the  more  when  Ingham  is  found  to  have 
expressed  great  satisfaction  the  year  of  this  Message 
with  the  way  the  Bank  made  transfers  of  public 
funds.  The  President  himself,  in  his  Message  of 
1829,  complimented  the  Bank  on  its  arrangement  for 
paying  the  public  debt  during  the  commercial  dis- 
tress of  that  year,  without  causing  any  noticeable 

*Doc.  Hist. 


THE  STORY  OF  A  BANK  109 

addition  to  the  pressure,  or  even  visible  effect  on  the 
operations  of  the  State  banks. 

The  date  of  the  McDuffie  report  was  April  13,1830. 
In  that  year  the  Government  paid  $3,000,000  on  its 
stock  note  in  the  Bank,  and  in  1831  paid  the  other 
$4,000,000.  In  July,  1831,  the  Bank  had  $7,000,000 
of  specie  in  its  vaults,  which,  however,  was  much  less 
than  the  previous  year. 

In  the  Senate,  Smith  of  Maryland  reported  from  the 
Committee  on  Finance  in  favor  of  the  Bank  at  every 
point.  His  main  topic  was  the  expediency  of  esta- 
blishing a  uniform  national  currency.  He  declared 
that  the  notes  of  the  United  States  Bank  were  such 
a  currency,  and  that  funds  were  transferred  from 
Philadelphia  to  St.  Louis,  New  Orleans,  and  other 
extreme  points  for  %  of  1%.  This  is  an  answer  to 
the  charge  that  we  have  seen  raised,  that  the  Bank 
was  extortionate  in  its  charge  for  exchange. 

"When  a  word  of  order  is  given  out  to  a  party,  the 
partisans,  eager  to  distinguish  themselves  by  their 
zeal,  hasten  to  push  it  to  extravagance.  It  must, 
therefore,  be  strong  proof  that  the  attack  on  the 
Bank  responded  to  no  strong  feeling  in  the  popular 
mind,  that  it  hung  fire  for  two  or  three  years.  The 
leading  politicians  in  the  Jackson  party  were  so 
committed  to  the  Bank,  that  it  was  awkward  for 
them  to  turn  against  it;  and  it  was  at  least  three 
years  before  the  local  banks,  seeing  the  opportunity 
which  was  offered  to  them,  began  to  join  in  the 
war  on  the  Bank.  Politically  this  last  effect  was  the 


110  THE  STORY  OF  A  BANK 

most  important  of  all.  It  was  the  formation  of  the 
Bank  democrats  as  a  wing  of  the  Jackson  party, 
which  gave  that  party  its  strength  and  accounted  for 
its  victories.  The  Bank  democrats  were  all  won  from 
amongst  those  who  otherwise  would  have  been  Whigs. 
The  distribution  of  the  deposits  in  1836,  weakened 
them  and  the  independent  treasury  alienated  them 
from  the  Democratic  party,  and  brought  about  the 
great  defeat  of  the  latter  in  1840."  This  quotation 
from  Sumner  is  instructive  at  this  point. 

May  10,  1830,  the  House  tabled  a  resolution  to  the 
effect  that  it  would  not  consent  to  a  renewal  of  the 
charter,  89  to  66,  and  May  29,  by  a  vote  of  95  to  67, 
tabled  a  series  of  resolutions  calling  for  a  comprehen- 
sive report  of  the  proceeding  of  the  Bank,  for  as  yet 
there  were  no  allegations  against  the  management. 
The  stock  now  rose  to  130.  But  the  war  on  the  Bank 
had  not  been  begun  in  a  spirit  that  was  amenable  to 
argument  or  reason,  and  of  course  neither  the  Mc- 
Duffie  nor  the  Smith  report,  however  convincing  to 
fair-minded  men,  had  any  deterrent  effect  on  the 
anti-Bank  coterie.  The  fire  was  renewed  by  Jackson 
again  advising,  in  his  Message  for  1830,  the  estab- 
lishment of  a  new  bank,  "as  a  branch  of  the  Treasury 
Department."  The  outline,  however,  was  even  more 
undefined  than  in  his  first  proposal.  It  would  seem 
that  the  merciless  flaying  which  his  previous  propo- 
sition had  received,  might  have  caused  a  modifica- 
tion of  the  scheme  for  a  bank  as  an  adjunct  to  the 
Presidency.  Some  have  professed  to  see  in  the 


THE  STORY  OF  A  BANK  111 

suggestion  last  made  the  nucleus  of  the  sub-Treasury 
system;  but  it  may  be  doubted  if  the  President  had 
any  definite  ideas  on  the  subject.  It  is  not  unlikely 
that  he  got  his  first  suggestion  from  Jefferson.* 

In  defence  of  the  President,  it  has  been  attempted 
to  lay  the  blame  for  the  plotting  to  Isaac  Hill  and 
Levi  Woodbury,  but  this  is  entirely  untenable. 
Amos  Kendall  and  Francis  P.  Blair  had  as  much  or 
more  to  do  with  it,  and  they  were  more  constantly 
voicing  their  sentiments  and  schemes  into  Jackson's 
ear.  Kendall  had  inspired  an  article  in  the  New  York 
Courier  and  Enquirer  in  November  prior  to  Jackson's 
first  Message,  outlining  in  a  set  of  queries,  what 
should  be  done  about  the  Bank,  and  which  embodied 
the  future  program  of  the  administration.  It  has 
been  said,  too,  that  the  attempt  to  force  Jackson 
adherents  on  the  Bank  was  merely  an  attempt  to 
change  it  from  being  entirely  a  Whig  institution. 
That  is  distorting  the  issue.  No  doubt  most  of  the 
directors  were  Whigs — they  were  chosen  from  among 
the  better  class  of  business  men,  most  of  whom  were 
of  that  party.  But  they  were  chosen  as  competent 
men,  and  not  for  their  party  affiliations. 

At  this  period  Jackson  was  professing  regard  for 
Biddle,  while  scheming  against  the  Bank.  After 

*"We  can  enter  upon  no  analysis  of  his  reasoning,  and  must 
refer  to  his  letters.  Their  general  purport  was  to  propose  a 
substitute  for  the  bank,  to  issue  Treasury  bills  on  a  specific 
tax  appropriated  for  their  redemption." — Randall's  Jefferson, 
III-386. 


112  THE  STORY  OF  A  BANK 

the  McDuffie  report  he  censured  Duff  Green,  editor 
of  the  Telegraph,  for  not  denouncing  the  Bank  in 
strong  enough  terms,  and  declared  another  paper 
would  be  found  for  the  purpose.  The  Globe,  and 
Blair,  resulted. 


CHAPTER  V 

THE  second  Message  found  a  strong  sup- 
porter in  Wayne  of  Georgia — whom  the 
President  subsequently  appointed  to  the 
federal  Supreme  Court.     Wayne  wanted 
the  bank  part  of   the  Message  referred  to  a  special 
committee,  alleging  the  Ways  and  Means  was  hostile 
to  the  President's  views;  he  believed  such  a  bank 
as    the    President    suggested     could    be    devised, 
and  wanted  unprejudiced  consideration.  The  House 
refused  him,  108  to  76. 

February  2, 1831,  Benton,  who  became  a  supporter 
of  the  President's  bank  policy,  asked  leave  of  the 
Senate  to  introduce  a  Resolution  declaring  that  the 
Bank  should  not  be  re-chartered.  Refused,  23  to  20. 
In  July,  that  year,  the  Secretary  of  War  ordered  the 
pension  funds  for  New  York  State  removed  from  the 
New  York  branch.  Biddle  remonstrated,  the  order 
being  the  second  one  of  the  kind  issued  in  defiance  of 
law,  as  the  pension  funds  under  terms  of  the  charter 
were  required  to  be  kept  in  the  Bank  and  its  branches 
at  such  places  as  had  them.  In  the  previous  case 
(New  Hampshire)  the  Auditor  had  refused  to  accept 
such  an  order  as  a  voucher.  Secretary  Cass  revoked 
this  last  order  March,  1832.  These  attempts  show 
113 


114  THE  STORY  OF  A  BANK 

how  the  Administration  was  working  to  undermine 
the  Bank,  heedless  either  of  laws  or  the  safety  of  the 
public  funds. 

In  1831,  the  President  was  mildly  militant  toward 
the  Bank.  Even  his  Message  of  that  year  was 
hardly  aggressive,  the  subject  being  referred  to  as 
one  on  which  he  had  already  discharged  his  responsi- 
bility. In  fact  his  attacks  had  appeared  to  meet  with 
little  approval,  either  from  the  general  public  or 
from  his  party.  Livingston  and  McLane  in  his 
cabinet  were  using  conciliating  arguments  favorable 
to  a  re-charter  of  the  Bank,  and  were  given  a  partial 
promise  by  Jackson,  that  he  would  consent  to  it  after 
the  presidential  election  the  following  year,  under 
modifications,  the  principal  being  that  the  Govern- 
ment should  hold  no  stock.  All  the  cabinet  members, 
with  one  exception,  were  opposed  to  his  ruinous 
policy.  McLane,  Secretary  of  the  Treasury,  in  his 
report  this  autumn,  made  an  extended  argument 
favoring  the  Bank  at  all  points,  and  produced  some- 
thing of  a  sensation,  it  being  so  in  conflict  with  the 
sentiments  of  the  President.  But  it  was  remembered 
that  McLane  was  originally  a  Federalist,  and  the 
anti-Bank  set  sneered  apologetically  at  his  opinions. 
Blair  excused  him  in  an  editorial  in  the  Globe,  at  the 
same  time  giving  him  to  understand  that  he  had 
overstepped  his  proper  limits. 

It  is  clear  that  during  this  year  Biddle  did  not 
despair  of  Jackson,  being  confident  of  strong 
support  in  the  cabinet.  While  matters  were  practi- 


THE  STORY  OF  A  BANK  1 15 

cally  arranged  to  wait  till  after  election,  the  Bank 
was  not  slumbering.  It  had,  after  once  becoming 
convinced  of  the  designs  of  the  Administration,  set 
about  to  counteract  whatever  effect  they  might 
produce.  It  resorted  to  circulating  pamphlets,  and 
in  purchasing  space  in  newspapers  for  the  publica- 
tion of  reports  and  speeches  favorable  to  it.  So  far, 
although  two  years  had  passed  since  the  first  attack, 
it  was  uninjured,  so  far  as  could  be  discerned.  It 
may  have  been  that  this  activity  gave  Jackson  new 
offence,  this  and  the  favorable  attitude  toward  the 
Bank  of  the  National  Republicans,  Clay's  party. 
At  any  rate  there  is  good  reason  to  suspect  that  he 
played  false  to  his  promise — or  at  least  his  implied 
promise — to  Livingston  and  others,  and  prompted 
the  move  that  was  made  by  Benton  and  Clayton  for 
an  investigation,  to  be  noted  later. 

It  was  a  weak  point  in  the  Bank  that  the  stock- 
holders held  meetings  only  triennially.  One  of  these 
meetings  was  held  in  September,  1831,  at  which 
Stephen  Girard  presided.  A  report  was  issued  by  a 
committee  of  seven,  of  which  Horace  Binney  was 
chairman,  and  which  verified  the  statements  of  the 
directors.  It  showed  a  perfectly  healthy  condition, 
with  circulation  nearly  $23,000,000,  deposits  $16,368,- 
000,  including  $7,252,000  Government  funds,  and 
loans  on  personal  security  $41,585,000.  During  the 
previous  three  and  a  half  years,  dividends  had  been 
7//£%-  Its  managers  asserted,  with  every  evidence 
of  truthfulness,  that  "the  welfare  of  the  United  States 


116  THE  STORY  OF  A  BANK 

Bank  is  now  fully  identified  with  that  of  the  American 
people." 

Now  an  unfortunate  series  of  happenings  worked  to 
the  Bank's  disadvantage.  It  does  not  appear  that 
the  overtures  made  by  the  National  Republicans 
were  encouraged  by  it  to  the  extent  to  make  their 
leaders  assume  that  it  would  join  forces  with  them  as 
against  Jackson  and  the  Democrats.  It  was  not 
until  December,  1831,  when  the  National  Republi- 
cans, in  their  convention  at  Baltimore,  nominated 
Henry  Clay  for  the  presidency  and  adopted  a  plat- 
form pledging  to  support  re-charter — in  fact  resting 
the  principal  plank  of  their  platform  on  the  Bank — 
that  it  became  definitely  understood  that  the  charter 
would  be  a  campaign  issue.  It  seems  that  Biddle 
was  not  anxious  for  this,  and  would  not  have  given 
his  consent  to  it  if  he  had  felt  any  confidence  in 
Jackson,  or  had  obtained  what  he  considered  a 
definite  promise  from  him  that  he  would  not  oppose 
the  re-charter  after  the  election  was  over.  As  it 
was,  he  acted  against  the  advice  of  some  of  his  most 
influential  associates  and  friends. 

fl       The  Clay  supporters  no  doubt  believed  that  they 

[      could  defeat  Jackson  on  the  Bank  issue.    They  pro- 

V     posed  to  have  the  bill  for  the  re-charter  passed,  and 

\force  the  problem  on  the  President.     If  he  should 

s^-Jveto  it  they  felt  sure  he  would  lose  Pennsylvania, 

y  while  if  he  failed  to  do  so,  he  would  sacrifice  much  of 

/  his  strength  in  the  South  and  West.     It  appeared 

y  like  a  shrewd  move,  and  a  fairly  safe  one  for  the  Bank 


THE  STORY  OF  A  BANK  117 

to  link  its  chances  with;  the  worst  thing  about  it 
being  the  fact  of  throwing  its  fortunes  into  the 
political  arena,  and  becoming  a  recognized  party 
institution.  Biddle  has  been  censured  for  being 
drawn  into  the  scheme,  but  it  was  a  situation  he^ 
could  not  control.  Clay  would  not  wait.  The 
National  Republicans  would  advocate  re-charter 
anyhow,  and  whether  the  Bank  supported  or  became 
allied  with  them  or  not,  it  would  probably  kill  its 
chances  with  Jackson.  If  it  refused  to  join  with 
Clay  it  would  be  accused  of  treachery  or  ingratitude, 
and  having  thus  sacrificed  friendship  in  that  quarter, 
its  chances  would  be  very  slender  even  if  Clay  should 
win.  The  convention  that  nominated  him,  in  an 
address  to  the  public,  said  that  the  President  was 
"fully  and  three  times  over,  pledged  to  the  people  to 
negative  any  bill  that  may  be  passed  for  re-chartering 
the  Bank,  and  there  is  little  doubt  that  the  additional 
influence  which  he  would  gain  by  a  re-election  would 
be  employed  to  carry  through  Congress  the  extra- 
ordinary substitute  which  he  has  repeatedly  pro- 
posed." 

Of  course  it  was  construed  by  the  Jackson  party 
as  a  movement  by  the  Bank,  and  we  find  Benton 
asserting  now  that  the  Bank  had  attacked  the  Admin- 
istration. By  them  it  was  made  to  appear  that 
Jackson  had  receded  from  his  policy,  had  then  been 
attacked,  and  thus  had  been  forced  to  renew  the 
fight  to  a  finish.  In  considering  the  probability 
of  this,  one  must  consider  Jackson's  disposition.  It 


118  THE  STORY  OF  A  BANK 

is  not  at  all  likely  that  he  ever  relented  in  his  rancor 
toward  the  Bank,  but  merely  bided  his  time,  and 
assisted  to  bring  about  a  condition  of  affairs  that 
would  upset  all  the  plans  for  putting  the  question 
over  till  after  the  election. 

In  January,  1832,  the  memorial  of  the  Bank  for 
renewal  of  its  charter  was  presented  in  the  Senate 
by  Dallas,  and  in  the  House  by  McDuflSe,both  demo- 
crats, but  both  favorable  to  the  Bank.  Biddle  had 
been  in  favor  of  having  Webster  present  it,  and  only 
deferred  to  Dallas,  son  of  the  Secretary  of  the  Treas- 
ury, to  whom,  more  than  any  other  man,  the  Bank 
owed  its  existence,  who  claimed  the  duty  as  belonging 
to  a  Senator  from  Pennsylvania.  He,  however,  did 
not  manage  the  matter  with  much  skill;  doubted 
whether  the  movement  was  not  premature,  and  also 
as  to  the  policy  of  the  memorial,  "lest  it  might  be 
drawn  into  real  or  imaginary  conflict  with  some 
higher,  some  more  favored,  some  more  immediate 
wish  or  purpose  of  the  American  people."  This 
did  not  show  much  enthusiasm,  but  was  more  the 
trepidation  of  an  untried  leader;  and  in  both  Cham- 
bers the  reports  were  favorable.  The  bare  possibility 
of  the  re-charter  being  denied  had  been  sufficient  to 
encourage  the  proposition  from  different  sources  of 
wild  and  extravagant  bank  schemes,  some  one  of 
which  it  was  feared  might  be  tried  as  an  experiment 
with  financial  disaster,  if  the  Bank  were  not  to  go  on. 
In  the  Senate  the  memorial  was  referred  to  a  select 
committee  (of  which  both  Webster  and  Hayne  were 


THE  STORY  OF  A  BANK  119 

members)  and  the  bill  ordered  to  second  reading; 
but  was  then  laid  on  the  table  pending  an  investiga- 
tion ordered  by  the  House. 

Soon  after  the  opening  of  the  Clay  campaign,  the 
Jackson  party  renewed  its  attempts  to  cast  odium  on 
the  Bank.  Benton  was  the  head  and  front  of  the 
movement  in  the  House,  and  it  is  not  doubted  that 
the  paper  containing  the  seven  alleged  important 
charges,  and  fourteen  minor  charges  and  specifica- 
tions, which  Clayton  of  Georgia  used  as  the  basis  of 
his  demand  for  an  investigation  of  the  bank,  was  in 
his  hand-writing.  Clayton  submitted  his  resolution 
containing  the  counts  and  this  demand  in  February, 
1832.  The  House  appointed  a  Committee  which 
reported  April  30.  This  is  the  famous  investigation 
of  1832,  out  of  which  arose  much  acrimony,  and 
which  has  ever  since  been  the  subject  of  misappre- 
hension and  mis-statements.  The  examining  Com- 
mittee had  been  directed  by  the  House  merely  to 
inquire  and  report  whether  or  not  the  provisions  of 
the  Bank's  charter  had  been  violated.  But  a  major- 
ity of  the  Committee  was  hostile,  and  took  up  all 
the  points  noted,  and  proceeded  to  examine  all  the 
affairs  and  the  officers  of  the  Bank.  It  made  a 
recommendation  for  postponement  of  the  charter  till 
the  public  debt  had  been  paid,  this  report  being 
signed  by  R.  M.  Johnson,  who  intimated  that  he 
did  it  to  please  the  Committee,  and  stated  on  the 
floor  of  the  House,  that  he  had  not  looked  at  a  docu- 
ment in  Philadelphia.  The  minority  recommended 


120  THE  STORY  OF  A  BANK 

that  the  charter  be  renewed,  this  report  being  signed 
by  J.  Q.  Adams. 

As  the  seven  serious  and  fourteen  minor  charges 
seemed  to  contain  all  that  anybody  knew  or  could 
by  the  furthest  stretch  trump  up  against  the  Bank, 
and  also  for  the  reason  that  a  review  of  the  findings 
in  detail  give  an  insight  into  the  actual  conditions  of 
the  institution,  as  well  as  of  the  methods  that  were 
being  pursued  against  it,  the  necessary  space  will 
be  given  to  it.  The  points  of  the  seven  high  charges 
are  as  follows: 

1.  Usury — technical  violation  of  the  limit  of  six 
per    cent,    provided  in   the   charter;    this  alleged 
violation  being  charges  for  discounts  and  domestic 
exchange  together. 

2.  Branch  drafts  as  currency.     The  amount  of 
these  outstanding  was  $7,400,000.     The  majority 
of  the  Committee  doubted  the  lawfulness  of  branch 
drafts,  but  said  nothing  about  danger  from  them  as 
instruments  of  credit.     (It  has  already  been  noted 
that  their  legality  was  established  in  opinions  from 
Webster,  Binney,  Gallatin  and  Wirt.) 

3.  Sales  of  coin,  especially  American  coin.     The 
Bank  had  bought  and  sold  foreign  coin  by  weight  and 
had  sold  $84,734.44  of  American  gold  coin.     The 
majority  held  that  foreign  coins  were  not  bullion, 
because   Congress  had  fixed  their  value  by   law. 
Adams  exposed  the  shallowness  of  this  claim.     All 
gold  coins  at  this  time,  American  included,  were  a 
commodity,  not  money. 


THE  STORY  OF  A  BANK  121 

4.  Sales  of  public  stock.     The  Bank  was  forbid- 
den by  its  charter  to  sell  U.  S.  Bonds.     In  1824, 
upon  the  refunding  of  the  public  debt,  the  Bank  sub- 
scribed for  a  new  issue.     It  had  special  permission  by 
Act  of  Congress  to  sell  them.  Nevertheless,  the  major- 
ity shut  its  eyes  to  that  fact  and  disproved  of  the  sale. 

5.  Gifts  to  roads,  canals,  etc.     The  Bank  had 
made  two  subscriptions  of  $1,500  each  to  the  stock 
of  turnpike  companies.     The  other  cases  were  all 
petty  gifts  to  local  fire  companies,  etc.     The  majori- 
ty argued  that  since  the  administration  had  pro- 
nounced against  internal  improvements,  the  Bank 
ought  not  to  have  assisted  in  such  works!     Adams 
said  the  internal  improvements  were  opposed  by  the 
administration  on  the  ground  of  unconstitutionality, 
when  undertaken  by  the  Federal  Government,  and 
asked  what  argument  that  furnished  against  such 
works  when  undertaken  by  individuals?     The  gifts 
were  thought  such  as  proper  for  the  Bank  to  make  to 
increase  its  security,  etc.     What  harm  was  there  in 
that  to  the  administration? 

6.  Building  houses  to  rent  or  sell.     The  Bank  had 
been  obliged  in  some  cases  to  take  realty  for  debts 
when  it  could  not  sell,  and  had  in  a  few  cases  im- 
proved.    The  amount  was  trivial,  and  the  cases  such 
as  involved  no  intentional  violation  of  the   charter. 

7.  Non  User.     The  charge  being  that  the  Bank 
had  failed  to  issue  notes  in  the  South  and  West. 
This  was  easily  proved  false,  and  according  to  Adams 
would  not  have  been  a  charter  violation  anyway. 


122  THE  STORY  OF  A  BANK 

Now  come  the  fourteen  minor  charges  involving 
mismanagement,  etc.,  and  the  truth  about  them  as 
discovered. 

1.  Subsidizing  the  press.     Charged,  that  Webb 
&  Noah,  of  the  "Courier  &  Inquirer"  (Administra- 
tion organ  to  April  '31,  when  it  flopped  on  the  Bank 
question)  borrowed  at  the  Bank.     Noah  got  a  loan 
there  to  buy  a  one-half  interest  in  the  paper.     Obvi- 
ously this  was  a  bad  case — the  Bank  lending  money 
on  security  to  the  publishers  of  a  newspaper  not 
favorable  to  Andrew  Jackson.     But  it  was  found  that 
publishers  of  administration  organs  also  had  loans 
from  the  Bank.     What  then?    Adams  declared  there 
was  no  law  against  subsidizing  the  press,  the  phrase 
meaning  nothing.     Should  editors   be   allowed   no 
Bank  accommodations?     It  appeared  then,  that  if 
the  Bank  discounted  a  note  for  an  administration 
editor,  it  had  subsidized  him;  if  for  an  opposition 
editor,  it  was  a  bribe. 

2.  Favoritism  to  Thomas  Biddle.     Thomas  was  a 
second  cousin  to  Nicholas,   and   was   the   Bank's 
broker.     This  count  was  on  charges  made  by  one 
R.  M.  Whitney,  who  "was  placed  in  respect  to  the 
important  object  of  his  evidence  in  the  position  of  a 
convicted  calumniator."     Thomas  Biddle  did  have 
large  loans  amounting  to  $1,131,672  at  5%.     Whit- 
ney claimed  at  no  interest. 

3.  Exporting  specie  and  drawing  specie  from  the 
South   and   West.    The   branch   drafts   helped   to 
produce  the  result  of  drawing  silver  North  and  East 


THE  STORY  OF  A  BANK  123 

from  the  South,  but  no  harm  resulted.  More  specie 
was  imported  to  New  Orleans  from  Mexico  than 
before,  and  there  was  more  of  it  in  the  Mississippi 
Valley.  "  The  charge  of  causing  an  export  of  specie 
was  only  an  expression  of  ignorant  popular  preju- 
dice. "  (Perhaps  there  should  have  been  town  meet- 
ings to  sanction  it  when  drafts  were  sold  on  London 
for  use  in  China.) 

4.  Improper  increase  of  branches.     There  may 
have  been — Cheves  thought  so.     But  the  Bank  was 
importuned  to  establish  them,  and  was  complained  of 
if  one  was  lacking  where  influential  politicians  wanted 
it.     Most  of  these  thought  there  were  too  few. 

5.  Over-expansion  of  circulation.     As  to  this,  the 
Bank  always    made  a  good    showing  as  to  cash 
against  liabilities. 

6.  Failure  to  serve  the  nation.     Somehow  it  was 
thought  the  Bank  gained  by  transferring  funds  from 
the  Atlantic   Coast   inland.     Nothing  apparent  in 
the  charge. 

7.  Mismanagement    of    public    deposits.     This 
charge  simply  showed  that  the  majority  was  ignorant. 

8.  Postponement  of  payment  of  the  3%  Bonds. 
Friends  said,  Biddle's  reasons  were  good;  enemies 
said,  they  were  bad.     It  does  not  seem  that  any 
harm  had  been  done. 

9.  Incomplete  number  of  directors.     This  was 
caused  sometimes  by  appointment  of  Government 
directors  being  delayed  in  the  Senate.     But  what  a 
crime  to  accuse  the  Bank  of! 


124  THE  STORY  OF  A  BANK 

10.  Large     expenditures     for  printing.         This 
amounted  to  $6,700  in  1830,  $9,100  in  1831.     From 
1829,  the  year  of  the  first  attack,  the  Bank  had  put 
out  several  publications  to  counteract  the  influence 
on  public  opinion. 

11.  Large  contingent  expenditures.     There  was 
a  contingent  fund,  the  footings  of  which,  in  1832, 
were  $6,000,000  to  sink  losses  of  the  first  few  years, 
the  bonus,  premiums  on  public  stocks  bought,  bank- 
ing houses,  etc.     The  suggestion  was  that  in  this 
might  be  hidden  a  corruption  fund. 

12.  Loans  to  members  of  Congress  in  advance  of 
appropriations.     Adams  objected  to  this  as  an  evil 
practice.     He  said  afterwards  that  the  investigation 
into  this  was  dropped  because  it  was  found  that  a 
large  number  of  Congressmen  of  both  parties  had 
had  loans. 

13.  Bank   refused  to  give   list   of  stockholders 
resident  in  Connecticut,  to  authorities  of  Connecticut 
for  taxing  purposes.     It  was  not  under  legal  obliga- 
tions to  do  so. 

14.  Usurpation  of  the  control  of  the  Bank  by  the 
Exchange  Committee  of  the  Board  of  Directors  to 
the  exclusion  of  the  other  Directors.     This  charge 
denied,  and  not  well  proved. 

The  frivolous  nature  of  all  but  two  or  three  of  the 
counts  in  this  list  of  charges  is  apparent,  and  they 
must  have  been  incited  either  by  ignorance  or  malice. 
Sumner  makes  this  comment:  "If  we  sum  up  all 
points  made  by  the  majority  of  the  Committee,  they 


THE  STORY  OF  A  BANK  125 

appear  to  maintain  that  the  Bank  ought  to  lend  the 
public  deposits  liberally  and  draw  them  in  promptly 
when  needed,  in  order  to  pay  the  public  debt,  yet 
refuse  no  accommodation  (especially  to  any  one  who 
was  embarrassed)  except  anti-Administration  edi- 
tors; should  not  sell  its  public  stocks,  not  increase 
its  circulation,  not  draw  in  its  loans,  not  part  with  its 
specie,  not  draw  on  the  debtor  branches  in  the  West, 
not  press  the  debtor  local  banks,  and  not  contract 
any  temporary  loans."  The  reading  and  thinking 
public  considered  it  a  complete  vindication,  except- 
ing those  who  were  biased.  The  investing  public 
was  highly  pleased  at  the  finding,  because  if  this  was 
all  that  malevolence  armed  with  the  most  powerful 
means  of  attack  could  do,  the  Bank  must  be  in  every 
way  sound. 

It  is  asserted  by  cautious  writers  who  manifestly 
aim  at  impartiality  in  their  judgment,  that  neither 
this  investigation  nor  any  other  made  by  a  Congres- 
sional committee,  was  as  deep  and  thorough  as  the 
case  required,  nor  free  from  political  bias.  In  this 
instance  it  is  said  the  examination  rested  too  much 
on  statements  of  the  directors  and  officers.  This 
is  not  unreasonable.  The  most  unfavorable  view  of 
the  conditions  relate  to  the  postponement,  at  Biddle's 
request,  of  the  redemption  of  three  per  cent  bonds  of 
the  Government,  and  such  subsidizing  as  the  Bank 
had  done.  As  to  the  first,  his  plausible  reason  was 
suspected  as  not  being  the  true  one,  the  real  one  being 
that  the  Bank  was  experiencing  a  stringency  owing 


126  THE  STORY  OF  A  BANK 

to  the  operations  of  the  branch-draft  system,  by 
which  so  much  capital  was  drained  away  to  the  non- 
paying  branches;  and  would  have  been  hard  pressed 
to  meet  the  Government  drafts.  Admitting  it, 
where  was  the  transgression?  Jackson  and  others 
had  censured  the  Bank  for  drawing  specie  away  from 
the  South  and  West.  Now  it  is  attempted  to  make 
a  wrong  out  of  a  system  that  worked  the  other  way. 
Whatever  wrong  there  was  lay  in  the  branch-draft 
scheme,  which  proved  dangerous;  but  at  the  most 
was  an  error  of  policy. 

Then  it  is  noted  that  the  Bank,  as  was  proved 
later,  had  already  begun  making  donations  to  rail- 
road and  canal  enterprises.  But  it  will  be  seen  that 
these  were  inconsiderable  in  proportion  to  the  vast 
business  and  income  of  the  Bank;  and  when  it  is 
remembered  that  it  was  the  custom  of  the  time,  that 
banks  generally  were  virtually  compelled  to  do  so; 
that  such  enterprises  did  not  then  have  Government 
aid,  and  depended  on  private  generosity,  it  seems 
querulous  to  urge  this  as  a  reflection  either  on  the 
motives  or  the  prudence  of  the  Bank.  Investigations 
of  1832-'34,  found  that  donations  of  this  character 
from  1817  to  1831,  totaled  $4,620. 

It  will  be  found  that  in  1836,  and  later,  the  charge 
relating  to  Thomas  Biddle  then  applied,  the  cotton 
speculations  in  connection  with  him  being  one  of  the 
transgressions  that  contributed  to  its  final  downfall. 
The  charge  (2)  concerning  the  action  of  the  Exchange 
Committee  in  excluding  three  of  the  Government 


THE  STORY  OF  A  BANK  127 

directors  from  participating  in  the  transaction  of  Jts 
business,  touched  a  vulnerable  spot.  The  excuse  was 
that  those  directors  were  acting  more  as  spies  for  the 
President  than  in  the  interest  of  the  shareholders, 
and  sought  to  impede  and  hamper  the  committee 
in  the  performance  of  its  duties.  It  was  a  strong 
symptom  of  the  evil  resulting  from  the  antagonism  of 
the  administration.  It  may  be  admitted  that  the 
Bank  was  feeling  the  ill  effect  growing  out  of  the  at- 
tacks, open  and  insidious,  that  had  been  made  upon  it 
to  a  greater  degree  than  the  investigation  disclosed, 
but  when  the  character  of  these  attacks  are  con- 
sidered, the  time  they  had  continued,  the  power  that 
waged  the  warfare,  and  the  sensitiveness  of  credit  to 
evil  reports,  the  wonder  grows  that  the  effect  had  not 
been  worse. 

Curtailment  brought  blame  on  the  Bank  for  sever- 
ity, expansion  for  lack  of  conservatism.  On  the 
authority  of  Gallatin,  the  Bank  ceased  to  act  as  a 
regulator  of  the  currency  in  the  years  1832-'33, 
when  it  expanded  its  discounts  and  stock  investments 
to  185%  of  its  capital,  while  sound  city  banks  did 
not  run  over  160%.  He  makes  it  clear  that  it  was 
only  by  keeping  the  proportion  lower  than  that  of  the 
other  banks,  that  the  Bank  of  the  United  States 
could  keep  them  debtors  and  so  exercise  its  regulative 
power.  But  this  was  more  than  three  years  after 
Jackson  charged  it  with  having  failed  in  this  respect. 

Biddle's  power  was  now  at  its  zenith.  The  direc- 
tors gave  him  practically  unlimited  authority  to  act. 


128  THE  STORY  OF  A  BANK 

He  had  been  forced  into  a  fight,  and  he  was  fighting, 
undoubtedly  with  all  the  resources  at  his  command, 
the  life  or  death  of  the  Bank  being  the  issue.  It  is 
utterly  unreasonable  to  accuse  him  of  entering  poli- 
tics and  squandering  the  funds  of  the  Bank.  From 
1829  to  1832,  he  repeatedly  warned  the  officers  of  the 
Bank's  branches  to  abstain  from  mixing  in  politics, 
and  against  making  loans  from  political  considera- 
tions. The  record  carefully  examined  shows  that  he 
resented  interference  on  political  grounds,  resisted 
what  has  been  construed  by  unbiased  judges  as  politi- 
cal blackmail,  and  that  prior  to  these  advances  the 
Bank  was  not  charged  by  any  responsible  person 
with  political  meddling.  We  have  heard  McDuffie,  a 
democrat,  compliment  it  for  its  freedom  from  politics. 
It  may  have  been  that  some  of  the  branch  officers 
spoke  their  party  preferences  emphatically,  as  every 
man  did  in  those  days,  but  every  attempt  to  prove 
that  any  one  of  them  had  employed  menace,  or 
Bank  money  in  campaigning,  failed  entirely. 

Now,  under  necessity,  the  situation  changed. 
Whether  Biddle  pursued  the  wisest  course  in  taking 
quarters  at  Washington  and  making  himself  so  prom- 
inent in  the  Jackson-Clay  campaign  may  well  be 
questioned.  His  intimate  relationships  there  with 
members  of  both  chambers  of  Congress,  his  lavish 
expenditures,  his  assertive  manner,  and  perhaps 
some  of  his  utterances,  caused  a  great  deal  of  com- 
ment. He  was  a  national  figure;  his  forces  were 
aligned  with  those  of  the  party  opposing  the  Presi- 


THE  STORY  OF  A  BANK  129 

dent,  and  it  was  asked,  what  would  he  be  if  he  suc- 
ceeded in  defeating  his  fearful  adversary?  His  fool 
friends,  or  cunning  enemies,  began  to  speak  of  him  as 
a  Presidential  possibility.  It  is  questionable  whether 
his  boldness  did  not  overshoot  the  mark.  Yet  it  is 
said  that  he  was  not  vain  or  over-confident,  and  that 
he  expressed  himself  ready  to  accept  any  form  of 
charter  to  which  Jackson  would  consent.  While  the 
anti-Bank  men  could  point  to  a  good  deal  that  seemed 
to  warrant  their  accusation  that  he  was  corrupting 
Congress,  and  while  we  may  allow  there  was  some 
truth  in  it,  it  is  significant  that  no  particular  cases 
were  cited  at  that  time.  The  most  that  could  be 
established  was  the  questionable  propriety  of  a 
Member  doing  business  with  the  Bank. 

The  anti-Bank  party  professed  to  be  deeply  pained 
at  the  course  of  the  Bank.  As  has  been  stated,  they 
declared  that  the  Bank  was  forcing  the  fight.  Ben- 
ton  claimed  that  after  Jackson's  first  Message  there 
was  "ceaseless  activity  in  all  parts  of  the  country  on 
behalf  of  the  Bank.... conducted  in  a  way  to  operate 
most  strongly  upon  the  public  mind,  and  to  conclude 
the  question  in  the  forum  of  the  people  before  it 
could  be  brought  forward  in  the  national  Legisla- 
ture, "  yet  "at  the  same  time  little  was  done  or  could 
be  done  on  either  side."  One  can  see  how  grievous 
it  was  to  senatorial  pride,  but  not  the  consistency 
between  the  two  statements.  How  was  it  that  a 
Jacksonian  democrat,  one  of  the  party  seeking  at  all 
times  to  justify  its  course  under  popular  approval, 


130  THE  STORY  OF  A  BANK 

could  doubt  the  right  or  propriety  of  a  financial 
corporation  appealing  to  the  sense  and  fairness  of  the 
people?  It  should  be  observed  that  Benton's 
speeches  on  the  subject  avoided  the  question  of 
constitutionality,  and  as  he  says,  "took  up  the  insti- 
tition  in  a  practical  sense  as  having  too  much  power 
over  the  people  and  the  Government.... and  being 
too  much  disposed  to  exercise  that  power  to  the 
prejudice  of  freedom  and  equality  which  should 
prevail  in  a  republic."  The  intelligent  reader  is 
likely  to  experience  a  sense  of  regret  that  a  man  of 
Benton's  great  capacity  should  have  indulged  in 
such  demagogic  phrases.  He  denounced  the  Bank  as 
corrupting  both  the  press  and  the  people,  and  mixed 
this  up  with  the  argument,  which  he  long  held  to,  for 
a  metallic  currency. 

The  Presidential  issue  had  been  joined  over  the 
Bank,  unfortunately,  and  the  bitter  fight  was  on.  The 
Jackson  party  scrupled  at  nothing  in  their  utterances 
against  the  institution.  As  Schouler  says, — "the 
challenge  flung  out,  Jackson  could  give  it  but  one 
answer; and  now  his  champions  essayed  to  conquer  on 
the  very  lines  his  foemen  had  selected.  They  fought 
relentlessly,  even  brutally;  and  not  content  with 
offering  broad  objections  to  a  new  charter,  of  which 
there  were  many,  they  struck  random  and  unscrupu- 
lous blows  at  the  credit  of  the  existing  institution,  as 
though  to  shatter  its  fortunes  and  all  the  mercantile 
and  private  interests  which  had  become  interwoven 
with  its  prosperity. "  And  this,  that  historian  prop- 
erly characterizes  as  "mob  warfare." 


THE  STORY  OF  A  BANK  131 

The  renewal  charter  as  proposed,  had  a  few  new 
features  intended  to  cover  flaws  in  the  old  one.  It 
was  for  fifteen  years.  The  directors  were  permitted 
to  appoint  officers  to  sign  notes  for  less  than  $100. 
No  notes  or  drafts  for  less  than  $50  might  be  issued 
which  were  not  payable  at  the  Bank  where  issued, 
and  the  Bank  must  receive  from  other  banks  at  any 
branch  the  notes  issued  at  any  branch.  It  was  to 
pay  a  bonus  of  $200,000  a  year  to  the  United  States, 
and  Congress  might  forbid  it  to  issue  notes  of  a  less 
denomination  than  $20.  A  list  of  stockholders  was 
to  be  reported  to  the  Secretary  of  the  Treasury  an- 
nually, and  a  list  of  stockholders  in  any  State  to  the 
Treasurer  of  that  State  on  his  request.  The  charter 
passed  the  Senate,  June  11,  1832,  28  to  20.  In  the 
House  no  debate  was  allowed,  because  everybody 
wanted  to  propose  various  schemes  in  the  way  of 
amendments,  and  of  course  those  Members  who  were 
loaded  with  such  schemes  claimed  that  politics 
forced  the  bill  through.  It  passed  July  3,  107  to  85 
and  went  to  the  President,  July  4.  The  Senate  voted 
to  adjourn  July  16.  It  was  understood  to  be  for  the 
purpose  of  forcing  Jackson  to  sign  or  veto  the  bill 
by  giving  him  more  than  ten  days.  Niles  is  quoted 
as  saying  that  a  week  before  the  passage  it  was  "six 
to  a  half  dozen  "  whether  the  bill,  if  passed,  would  be 
vetoed,  but  that  two  or  three  days  before  its  passage 
a  veto  was  confidently  expected.  Clay  is  credited 
with  the  bombastic  remark,  "If  Jackson  vetoes  it  I 
will  veto  him." 


132  THE  STORY  OF  A  BANK 

On  July  10,  Jackson  sent  in  his  veto.  Among 
other  reasons  were:  1.  The  Bank  would  have  a 
monopoly  for  which  the  bonus  was  no  equivalent. 
2.  One-fifth  of  the  stockholders  were  foreigners;  in 
case  of  war  with  a  foreign  nation  a  bank  owned 
almost  wholly  by  its  subjects  would  be  more  formid- 
able and  dangerous  than  the  naval  and  military 
power  of  the  enemy.  3.  Banks  were  to  be  allowed 
to  pay  the  Bank  of  the  United  States  in  branch 
drafts,  which  individuals  could  not  do.  4.  States 
were  allowed  to  tax  the  stock  of  the  Bank  owned  by 
their  citizens,  which  would  cause  the  stock  to  go  out 
of  the  country.  5.  The  few  stockholders  here  would 
then  control  it.  6.  It  was  unconstitutional.  7. 
The  business  of  the  Bank  would  be  exempt  from 
taxation.  8.  There  was  strong  suspicion  of  mis- 
management. 9.  The  President  could  have  given 
a  better  plan.  10.  The  Bank  would  increase  dis- 
tinctions between  rich  and  poor — that  it  would  pre- 
sent a  gratuity  of  many  millions  to  the  stockholders; 
that  the  Bank's  loans  in  the  West  were  a  burden  on 
the  industry  of  the  people;  that  the  millions  of  earn- 
ings which  foreign  holders  would  get  would  come  out 
of  the  earnings  of  the  American  people.  Besides, 
while  deprecating  haste  in  the  matter  of  the  charter 
now,  he  had  in  his  Messages  of  the  three  previous 
years,  urged  timely  action. 

Special  stress  was  laid  on  the  second,  fourth  and 
tenth  points.  The  operation  of  the  Bank  was  also 
represented  as  a  constant  oppression  of  the  people  of 
the  West,  by  the  people  of  the  East  and  of  Europe. 


THE  STORY  OF  A  BANK  133 

Sumner  points  out  that  all  and  each  of  these  argu- 
ments and  notions  were  those  of  the  old  Kentucky 
relief  contest.  It  will  be  noted  that  what  the  Presi- 
dent had  previously  alleged  as  the  chief  crime  of  the 
Bank,  political  meddling,  was  not  included.  It 
would  be  useless  to  descant  on  their  shallowness;  the 
reader  will  no  doubt,  as  has  been  suggested,  con- 
trast them  with  such  arguments  as  McDuffie's,  and 
draw  his  own  conclusion.  Its  appeal  was  to  ignor- 
ance, to  prejudice  of  Americans  against  foreigners, 
of  the  poor  against  the  rich,  of  section  against  section. 

In  estimating  President  Jackson's  qualities  and 
his  influence  on  the  people,  as  well  as  on  the  political 
ideas  of  his  time,  one  cannot  always  trust  too  much 
to  particular  incidents  or  detached  quotations  from 
his  utterances.  But  it  is  no  injustice  to  him  to  cite 
particular  utterances,  made  deliberately,  discussed 
in  his  cabinet,  and  sent  forth  in  his  Message,  as 
indicating  correctly  his  temperament  and  habits  of 
thought.  His  ruling  passion  was  the  exercise  of 
authority.  When  that  harmonized  with  law  and 
justice  and  morality,  so  much  the  better;  when  it 
did  not  he  had  no  apology  to  make.  A  paragraph 
in  his  Message  vetoing  the  Bank  charter  is  illustra- 
tive of  this.  In  declaring  his  objections,  he  not  only 
set  his  own  opinion  squarely  against  the  judgment  of 
the  Supreme  Court  on  the  question  of  the  Bank's 
constitutionality,  but  went  so  far  as  practically  to 
deny  that  Court  any  authority  over  either  the  execu- 
tive or  legislative  departments  of  the  Government. 


134  THE  STORY  OF  A  BANK 

"  If  the  opinion  of  the  Supreme  Court, "  he  said, 
"covered  the  whole  ground  of  this  act,  it  ought  not 
to  contest  the  co-ordinate  authorities  of  this  Govern- 
ment. The  Congress,  the  Executive,  and  the  court 
must  each  for  itself  be  guided  by  its  own  opinions 
of  the  constitution.  Each  public  officer,  who  takes 
an  oath  to  support  the  constitution,  swears  that  he 
will  support  it  as  he  understands  it,  and  not  as  it  is 
understood  by  others. " 

That  is,  everyone  in  authority  was  to  construe  the 
law  to  suit  his  own  desires,  and  enforce  it  or  not  as 
he  liked.  Relating  to  himself,  it  displayed  the  arbi- 
trary will  of  a  despot.  How  did  the  democrats  of 
his  day  square  it  with  their  alleged  principles? 

The  Message  as  a  whole  was  so  grotesque  a  paper, 
so  ludicrous,  even,  to  a  mind  of  ordinary  intelligence, 
that  the  Bank  circulated  30,000  copies  of  it  as  a 
campaign  document,  the  management  believing 
that  if  the  people  read  it  themselves,  instead  of 
taking  what  the  Jackson  newspapers  said  about  it, 
they  would  treat  it  with  the  scorn  it  deserved.  But 
they  were  greatly  mistaken.  It  was  a  forceful 
argument  to  the  ignorant  and  prejudiced,  and  to  those 
proud  freemen  who  could  see  nothing  objectionable 
in  suspending  the  powers  of  the  Constitution  in 
favor  of  any  public  official  who  felt  its  inconvenience 
and  who  felt  that  a  loan  from  a  foreigner  was  robbery* 
Instead  of  turning  popular  sentiment  in  favor  of  the 
Bank,  it  lifted  Jackson  to  the  summit  of  his  popu- 
larity. 


THE  STORY  OF  A  BANK  135 

The  charter  bill  went  again  to  the  Senate,  July  13. 
The  vote  was  22  to  19,  failing  of  the  constitutional 
majority.  If  the  Bank  was  to  survive,  it  was  now 
necessary  to  defeat  Jackson's  re-election.  Practi- 
cally all  of  the  local  and  State  banks  were  actively 
aiding  him.  The  important  banks  in  New  York  were 
a  strong  political  power  under  Van  Buren's  direction. 
All  wanted  a  share  of  the  Government  deposits. 
They  contributed  to  the  Jackson  campaign  fund  and 
used  their  influence  in  his  behalf.  While  the  Jackson 
men  saw  nothing  but  corruption  in  the  United  States 
Bank  distributing  pamphlets  and  subsidizing  news- 
papers, we  find  no  rebuke  from  him  for  the  others. 
"They  unquestionably  measured  by  two  standards, 
one  for  themselves  and  their  allies,  and  the  other  for 
the  Bank."  (Sumner) 

Jackson  was  re-elected  and  the  Bank  was  doomed. 
Its  charter  would  expire  by  limitation  one  year  before 
the  expiration  of  his  second  term,  but  he  and  his 
followers  did  not  propose  to  let  it  run  peacefully  to 
its  allotted  end.  In  his  annual  Message,  late  in 
1832,  he  as  much  as  declared  that  the  Bank  was 
bankrupt.  He  said  that  the  charges  against  it 
(invented  by  his  coterie  and  shown  by  the  investi- 
gation to  have  been  nine-tenths  false  and  frivolous) 
"may  justly  excite  the  apprehension  that  it  is  no 
longer  a  safe  depository  of  the  money  of  the  people. " 
He  also  advised  the  sale  of  the  stock  held  by  the 
Government.  The  malice,  not  to  say  dishonesty, 
of  these  utterances,  which  were  no  doubt  directly 


136  THE  STORY  OF  A  BANK 

aimed  at  undermining  public  confidence  in  the  insti- 
tution, become  more  apparent  when  it  is  remembered 
that  during  the  previous  summer,  the  Secretary  of 
the  Treasury  had  appointed  an  agent  to  examine 
into  the  affairs  of  the  Bank  for  the  purpose  of  ascer- 
taining whether  it  was  a  safe  depository  for  the 
Government's  funds.  This  agent  was  Henry  Toland, 
a  former  director  of  the  Bank,  by  appointment  of  the 
President,  and  a  strict  Jackson  partisan.  He  was 
now  engaged  in  business  in  the  West,  and  was  direct- 
ed to  investigate  particularly  as  to  the  Bank's 
western  loans  and  securities.  Although  a  partisan, 
Toland  was  also  a  business  man  with  a  conscience, 
and  after  careful  investigation  he  reported  that  the 
Bank  was  entirely  solvent,  and  that  its  western  debts 
were  of  a  sound  character. 

Not  having  made  good  on  a  single  count  of  the 
charges  of  violating  its  charter,  and  only  partially 
so  in  two  or  three  of  the  fourteen  charges  affecting 
the  Bank's  methods, — those  mainly  growing  out  of 
the  unjust  attacks  upon  it, — and  having  this  report 
made  by  his  special  agent,  the  President  still  pro- 
fessed to  fear  for  the  safety  of  the  Government's 
deposits.  Nothing  had  been  discovered  by  any  one 
to  warrant  the  charges,  which,  if  they  had  been  made 
by  a  private  individual,  would  have  subjected  him 
to  prosecution  for  libel. 

In  the  business  world,  however,  Jackson's  infat- 
uation was  now  so  well  understood  that  his  last 
attack  did  not  cause  much  consternation.  Toland's 


THE  STORY  OF  A  BANK  137 

report  no  doubt  helped  to  sustain  public  confidence 
in  the  Bank,  which  suffered  little,  and  only  in  the 
way  of  slight  runs  on  some  of  its  southern  branches. 

The  Committee  on  Ways  and  Means  in  the  winter 
of  1832-'33,  also  instituted  an  investigation  with 
respect  to  the  President's  charges;  and  in  February, 
'33,  Polk,  acting  on  the  advice  in  the  President's 
recent  Message,  reported  a  bill  from  this  Committee 
to  sell  the  stock  owned  by  the  nation  in  the  Bank;  it 
was  lost,  102  to  91.  The  report  of  this  Committee 
is  another  of  the  great  documents  about  the  Bank. 
The  majority  (Verplanck's  Report)  declared  the 
Bank  sound  and  the  deposits  safe.  It  showed  that 
on  January  1,  1833,  its  assets  were  $80,800,000, 
liabilities  $37,800,000,  net  $43,000,000,  or  a  surplus  of 
$8,000,000  over  the  capital  of  $35,000,000.  Circu- 
lation $17,500,000,  specie  $9,000,000.  The  State 
banks  were  estimated  to  have  $68,000,000  in  circu- 
lation and  $10,000,000  or  $11,000,000  in  specie. 
The  minority  report  could  only  question  whether  the 
assets  were  all  good:  claiming  also  that  they  could 
not  find  out  clearly  about  payment  of  the  3%  bonds 
of  the  United  States  heretofore  alluded  to,  but 
expressed  a  fear  that  the  Bank  had  obtained  a  loan 
for  that  emergency  in  Europe.  The  majority  said  it 
had  not,  and  that  there  was  no  more  to  argue  about. 

But  a  later  report  by  the  Polk  contingency  showed 
a  weakness  in  some  branches  in  the  South  caused  by 
the  so-called  "race-horse"  drafts,  the  short  cotton 
crop,  and  the  scare  caused  by  the  President.  There 


138  THE  STORY  OF  A  BANK 

had  been  runs  at  Lexington  and  Nashville,  and  the 
Tennessee  branches  were  found  in  the  worst  condi- 
tion. But  on  the  same  day  that  this  minority  report 
was  presented,  the  House  adopted  a  resolution,  109 
to  46,  that  the  deposits  might  safely  be  continued  in 
the  Bank.  Everybody  now  recognized  that  the 
attack  on  its  solidity  was  purely  a  political  partisan- 
ship matter. 

It  was  soon  after  this  that  three  of  the  Government 
directors  of  the  Bank  made  a  report  to  the  President, 
complaining  again  that  they  were  excluded  from  a 
knowledge  of  what  was  being  done.  They  declared 
that  under  the  power  lodged  in  the  Exchange 
Committee,  the  affairs  of  the  Bank  were  being  con- 
ducted in  secret,  and  impliedly  to  nefarious  ends. 
The  Committee  was  blamed  for  making  large  loans 
to  newspaper  publishers  as  subsidy  for  supporting 
the  Bank.  This  was  a  much  discussed  proposition. 
One  newspaper  turned  against  Jackson  after  estab- 
lishing such  relations  with  the  Bank;  yet  administra- 
tion publishers  also  borrowed  from  it.  In  fact  all 
newspapers  held  that  they  should  be  paid  for  printing 
long  documents  not  generally  read  by  the  people. 
Friendly  Congressmen  likewise,  thought  there  was 
nothing  wrong  in  the  Bank  disseminating  at  its 
charge  their  speeches  in  which  the  Bank  was  de- 
fended. 

^Catterall  relates  as  an  amusing  instance  the  fact 
that  John  Tyler  (whose  financial  honesty  has  not 
been  a  subject  of  question)  "while  voicing  the  austere 


THE  STORY  OF  A  BANK  139 

public  morality  of  Virginia  republicanism  since  the 
days  of  Jefferson,"  criticised  the  Bank  for  this;  but 
when  the  report  of  his  Committee  came  out,  and 
Biddle  asked  him  if  he  desired  the  Bank  to  circulate 
it,  promptly  requested  him  to  mail  a  thousand  copies 
to  his  constituents.  Biddle  is  said  to  have  been 
disgusted. 

It  is  not  desired  to  make  this  work  appear  as  the  de- 
fender of  the  Bank  or  of  Nicholas  Biddle,  but  it  can- 
not be  overlooked  that  the  charges  that  Biddle  was  a 
wholesale  briber  of  the  newspaper  press  is  not  sup- 
ported by  adequate  evidence.  That  is  the  opinion 
of  those  who  have  inquired  most  carefully  into  the 
matter.  The  record  shows  that  he  declined  advances 
from  publishers,  and  only  cultivated  them  when  he 
believed  that  it  was  vitally  necessary  for  the  Bank  to 
reach  the  public  with  plain  facts  in  opposition  to  the 
libels  that  were  circulated  against  it.  James  Gordon 
Bennett,  who  opposed  the  Bank,  intimated  to  Biddle 
that  he  needed  money  and  was  open  to  bargaining, 
and  his  overture  was  declined.  Jackson  complained 
that  by  resolution  of  the  board,  Biddle  was  author- 
ized to  dispense  funds  for  such  subsidizing  without 
vouchers;  that  it  was  at  the  expense  of  the  stock- 
holders, including  the  Government.  But  which 
was  the  more  culpable,  for  Biddle  to  buy  space  in  a 
newspaper,  or  lend  money  on  security  to  a  publisher, 
to  subserve  the  interests  of  the  Bank,  or  for  the 
President  to  subsidize  newspapers  to  support  his 
political  interests,  by  giving  the  publishers  positions 
on  the  Government  payroll? 


140  THE  STORY  OF  A  BANK 

The  total  expenses  of  printing  and  publishing 
incurred  by  the  Bank  from  1829  to  1834,  inclusive, 
was  found  to  be  $65,103,  and  the  amount  disbursed 
by  Biddle  without  designating  the  purpose  was 
$29,605.  This  was  censured  by  the  Senate  Commit- 
tee of  1834. 

The  same  writer,  who  seems  to  have  examined  the 
subject  with  care  and  candor,  repeats  the  assertion, 
that  while  the  Bank  lobbied  on  a  wide  scale  in  Wash- 
ington, as  it  afterwards  did  at  Harrisburg,  it  used  no 
corrupt  means,  so  far  as  evidence  that  can  be  found 
shows.  However,  it  advanced  money  to  Congress- 
men on  their  salaries  and  charged  them  no  exchange 
on  their  drafts  payable  at  far-away  points.  It 
loaned  money  to  numbers  of  them,  but  it  seems  at 
regular  rates  and  with  the  usual  security.  George 
McDuffie  borrowed  from  it  on  a  mortgage,  this  in 
1833,  two  years  after  his  report.  The  total  loans  to 
Congressmen  that  year  was  $374,766,  to  fifty-eight 
of  them.  They  seemed  to  be  good  loans  as  a  rule. 
The  Tyler  committee  in  1834  found  only  $400 
carried  to  suspense  account,  and  one  note  for  $500 
protested.  The  charge  was  made  that  the  Bank 
retained  a  lot  of  influential  members  as  attorneys, 
Webster  being  among  them,  but  the  number  did  not 
appear  as  at  all  out  of  proportion  to  its  extensive 
business,  nor  the  fees  excessive. 


CHAPTER  VI 

WE   have   now   arrived   at   another 
distinct   stage   of  the   Bank  war. 
Who  were  the  prime  instigators  of 
the   desperate   and   useless   enter- 
prise of  the  removal  from  the  Bank  of  the  United 
States  of  the  Government  deposits?     It  seems  to 
have  been  decided  on  soon  after  the  coalition  between 
the    Bank    and    the    National    Republicans.     The 
"kitchen  cabinet"  was  no  doubt  the  source  of  the 
inspiration.     Amos  Kendall,  Isaac  Hill,  F.  P.  Blair, 
Duff  Green — these  all  advocated  it,  while  the  cabi- 
net proper,  with  the  exception  of  Roger  B.  Taney, 
either  opposed  it  as  dangerous,  needless,  and  contrary 
to  good  faith,  or  were  non-committal. 

Such  serious  results  were  apprehended  by  some 
that  Jackson  was  constrained  to  think  a  while.  He 
is  said  to  have  consulted  Isaac  Bronson,  an  old 
friend  and  an  experienced  banker,  as  to  what  might 
happen  in  case  the  act  was  accomplished.  Bronson 
pointed  out  that  the  Bank  would  have  to  reduce  its 
loans  to  the  average  amount  of  the  Government 
deposits,  since  it  could  not  otherwise  meet  the  drafts 
without  reducing  its  specie  to  the  danger  point;  that 
if  it  so  curtailed,  the  State  banks  would  have  to  do 
141 


142  THE  STORY  OF  A  BANK 

likewise,  and  the  contraction  would  necessarily 
affect  business  conditions.  It  is  certain,  therefore, 
that  Jackson  had  the  forecast  of  an  expert  of  what 
would  follow.* 

Kendall  was  consulted  by  the  Secretary  of  the 
Treasury,  McLane,  who  had  espoused  the  cause  of 
the  Bank  as  an  institution  indispensable  to  the 
Government.  Gallatin  was  fearful  of  the  conse- 
quences. After  the  subject  was  agitated,  J.  A. 
Hamilton  called  a  meeting  of  business  men,  in  New 
York  City,  which  expressed  itself  decidedly  adverse 
to  it.  But  Jackson  never  cared  for  expressions  from 
business  organizations  unless  it  were  in  support  of 
his  political  fortunes. 

Woodbury  in  the  Cabinet  appeared  neutral — prob- 
ably lacked  the  moral  courage  to  oppose  what  he 
knew  to  be  wrong.  Cass  was  more  outspoken,  and 
would  not  give  his  assent  to  the  plan.  Taney  alone 
favored  it,  and  became  Jackson's  chief  adviser.  Van 
Buren  first  opposed  the  scheme  but  afterwards 
yielded.  Neither  Benton  nor  Barry,  nor  Van  Buren, 
was  active  in  the  matter.  It  no  doubt  grew  out  of 
the  fear  that  another  attempt  for  a  renewal  might  be 
able  to  secure  the  necessary  two-thirds  majority, 
and  he  determined  to  prevent  that  being  brought 
about.  Even  Polk,  who  complained  that  the  inves- 
tigations were  incomplete,  did  not  advocate  the 
removal  of  the  deposits. 

McLane,  refusing  to  obey  the  President's  order, 


"Catterall,  p.  291 


THE  STORY  OF  A  BANK  143 

was  transferred  to  the  State  Department,  and  Wil- 
liam J.  Duane  was  appointed  Secretary  of  the  Treas- 
ury. Here  we  find  the  son  of  the  slanderous  editor 
of  the  old  "Aurora"  brought  into  the  cabinet  to  aid 
in  the  vengeful  scheme.  But  he  proved  to  be  much 
unlike  his  father.  He  was  a  lawyer,  and  had  not 
been  a  politician  or  office  holder.  He  was  immedi- 
ately instructed  to  remove  the  deposits  and  to  make 
local  banks  Government  depositories  and  fiscal 
agents.  He  refused.  He  said  that  the  President 
was  in  the  hands  of  men  he  would  not  trust  person- 
ally or  politically.  Finding  him  unmanageable, 
it  was  then  decided  to  drive  him  out.  In  his  story 
of  the  case  five  years  later  he  said,  "I  heard  rumors  of 
the  existence  of  an  influence  at  Washington  unknown 
to  the  Constitution  and  to  the  country,  and  a  convic- 
tion that  they  were  well  founded  now  became  irre- 
sistible. I  knew  that  four  of  the  six  members  of  the 
last  Cabinet,  and  that  four  of  the  six  members  of  the 
present  Cabinet,  opposed  a  removal  of  the  deposits, 
and  yet  their  exhortations  were  nullified  by  individu- 
als whose  intercourse  with  the  President  was  clande- 
stine.... several  of  these  individuals  called  on  me 
and  made  many  of  the  identical  observations  in  the 
identical  language  used  by  himself.... in  short,  I 
felt  satisfied  from  all  that  I  saw  and  heard,  that 
factious  and  selfish  views  alone  guided  those  who 
had  influence  with  the  Executive,  and  that  the  true 
welfare  and  honor  of  the  country  constituted  no 
part  of  their  project. " 


144  THE  STORY  OF  A  BANK 

Jackson  now  commanded  Duane,  saying  in  a  paper 
he  read  to  the  Cabinet,  and  which  was  prepared  by 
Taney,  that  he  alone  assumed  the  responsibility, 
"after  the  most  mature  deliberation  and  reflection 
as  necessary  to  preserve  the  morals  of  the  people, 
the  freedom  of  the  press,  and  the  purity  of  the 
elective  franchise,  without  which  all  will  unite  in 
saying,  that  the  blood  and  treasure  expended  by  our 
forefathers  in  establishing  our  happy  system  of 
Government  will  have  been  vain  and  fruitless." 
The  reader  will  recollect  that  no  case  involving 
anything  of  this  kind  had  been  proved  against  the 
Bank.  He  would  not  dictate  to  the  Secretary,  but 
he  took  all  responsibility,  deciding  that  after  October 
l,no  more  public  money  should  be  deposited  in  the 
Bank,  and  that  current  drafts  should  withdraw  all 
public  money  then  in  it.  The  charter  of  the  Bank 
gave  the  Secretary  of  the  Treasury,  not  the  Presi- 
dent, authority  to  remove  the  deposits.  Duane  still 
refused  to  give  the  order,  and  also  refused  to  resign. 
He  was  dismissed  September  23. 

In  a  letter  a  month  after  his  dismissal  Duane  had 
this  to  say  of  the  President:  "It  is  but  too  obvious, 
that  we  misunderstood  the  qualities  of  General 
Jackson's  head,  or  else  he  has  been  wonderfully 
altered.  On  all  the  cardinal  questions  agitated,  he 
has  failed  to  be  consistent.  He  promised  purity  in 
selection  for  office,  yet  few  have  been  purely  made. 
He  professed  to  be  a  friend  to  domestic  industry,  yet 
he  has  done  more  than  anybody  else  to  prostrate  it. 


THE  STORY  OF  A  BANK  145 

He  advocated  a  national  government  Bank,  and  yet 
affects  to  dread  a  moneyed  aristocracy.  He  com- 
plained of  the  corruption  of  one  Bank,  and  takes 
forty  or  fifty  irresponsible,  paper-circulating  banks 
under  national  wing.  He  has  been  for  and  against 
internal  improvement.  He  denounced  nullification, 
yet  has  of  late  been  unsaying  all  that  he  said  in  his 
proclamation  (denouncing  it).  In  short,  I  do  not 
believe  he  ever  had  fixed  principles,  or  ever  arrived 
at  any  result  by  the  exercise  of  his  mind.  Impulses 
and  passions  have  ruled  him." 

All  of  which  is  not  necessarily  untrue  or  overdrawn 
because  it  was  the  utterance  of  a  man  with  injured 
feelings. 

An  incident  of  peculiar  interest  occurred  at  this 
time.  A  large  payment  by  France  on  the  spoliation 
judgment  falling  due,  the  Government  drew  on 
France  for  the  amount  February  7, 1833.  It  was  the 
first  installment.  The  Bank  accepted  the  draft  as 
for  a  commercial  debt  at  $961,240.30.  But  France 
had  made  no  appropriation  to  meet  it,  and  it  was 
protested  and  taken  up  by  Hottinguer  for  the  Bank. 
The  Bank  had  put  the  money  to  the  credit  of  the 
Treasury,  and  claimed  that  it  had  actually  been 
drawn.  Hence  it  declared  it  was  out  of  funds  for 
twice  the  amount  of  the  bill,  and  demanded  15% 
damages  under  an  old  law  of  Maryland,  still  applying 
to  the  District  of  Columbia.  After  a  time  the  Treas- 
ury repaid  the  purchase  money,  and  offered  to  pay 
actual  damages,  but  no  more.  Biddle  informed  the 


146  THE  STORY  OF  A  BANK 

Secretary  of  the  Treasury,  July  8,  that  the  sum  of 
$170,041  would  be  retained  out  of  a  3^%  dividend, 
payable  July  17,  on  stock  owned  by  the  United 
States.  It  was  a  wrong-headed  act,  and  not  approv- 
ed even  by  many  of  the  Bank's  friends.  In  March, 
1838,  the  Government  brought  suit  to  recover  in  the 
Circuit  Court  of  Pennsylvania.  It  got  judgment  for 
$251,243.54.  The  Bank  appealed  to  the  Supreme 
Court,  which  in  1844,  reversed  the  judgment,  finding 
that  the  Bank  was  the  true  holder  of  the  bill  and  en- 
titled to  damages.  On  a  new  trial  the  Circuit  Court 
gave  judgment  for  the  Bank.  The  United  States 
then  appealed  on  the  high  ground  that  a  bill  drawn 
by  a  Government  on  a  Government  was  not  subject 
to  the  law  merchant.  The  Supreme  Court  sus- 
tained this  view  in  1847,  and  again  reversed  the 
decision  of  the  Circuit  Court.  No  further  action 
was  taken;  but  it  left  an  unfavorable  impression  at 
the  time  of  the  first  dispute. 

Taney  was  transferred  to  the  Treasury  Depart- 
ment, and  gave  the  order  for  the  suspension  and 
removal  of  the  deposits.  This  was  September  26, 
1833.  It  is  said  that  no  political  act,  prior  to  the 
Civil  War,  caused  such  excitement  throughout  the 
country,  but  the  later  historians  express  the  opinion 
that  its  importance  was  exaggerated  in  the  financial 
world.  No  rational  explanation  has  been  given  why 
the  act  should  have  caused  so  much  commotion  and 
disaster.  The  results  were  peculiar  in  that  the  order 
did  not  immediately  harm  the  Bank.  Its  stock  fell 


THE  STORY  OF  A  BANK  147 

only  two  points,  and  when  the  contents  of  the  Presi- 
dent's paper,  read  to  the  Cabinet,  were  published,  it 
recovered,  there  appearing  no  new  charges.  There 
was  at  the  time  much  currency  given  the  report  that 
some  of  the  anti-Bank  clique  had  sold  shares  short, 
in  anticipation  of  a  big  drop,  and  that  they  were 
greatly  disappointed.  It  should  be  noted  that  the 
deposits  were  not  removed  all  at  once,  but  only  as 
disbursements  were  made,  Government  receipts  in 
the  meantime  going  to  the  new  depositories. 

The  administration,  it  seems,  first  planned  to  with- 
draw its  balance  in  a  summary  manner,  as  it  was  on 
demand,  and  took  credit  to  itself  for  its  moderation. 
At  the  time  there  was  high  financial  prosperity,  and 
only  a  tremor  was  felt  where  there  otherwise  would 
no  doubt  have  been  a  rude  shock.  The  Bank  had 
prudently  prepared  for  the  ordeal,  and  met  all 
demands,  a  slight  run  that  started  soon  ending.  If 
it  were  a  shell,  and  unsafe,  according  to  thePresident's 
assertion,  it  ought  now  to  crumble.  Because  it  did 
not  do  so,  its  enemies  used  the  fact  to  prove  their 
contention,  that  it  was  a  menace  in  its  great  power. 
Kendall  showed  a  disposition  the  most  discreditable, 
fairly  gloating  over  the  ruin  they  might  have  caused 
by  a  total  withdrawal  at  once,  "  as  if, "  says  Schouler, 
"the  loss  to  private  depositors,  among  whom  were 
widows  and  orphans,  the  ruin  of  confiding  stock- 
holders, the  loss  of  twenty  millions  or  more  of  notes, 
circulating  at  this  time  as  the  soundest  currency  in 
the  land;  as  if  the  shock  and  sudden  paralysis  at  all 


148  THE  STORY  OF  A  BANK 

the  nerve  centres  of  trade  would  be  a  spectacle  for 
any  but  demons  to  rejoice  in. " 

This  act  was  without  excuse,  and  merely  inline 
with  a  bigoted,  destructive  policy.  The  Bank  had 
paid  a  bonus  to  get  the  public  deposits.  The  Govern- 
ment, although  it  had  authority  by  the  charter  to 
remove  its  funds,  yet  was  not  presumed  to  do  so 
without  legitimate  cause.  After  effecting  the  re- 
moval, Blair  and  his  newspaper  and  other  adherents 
of  the  President  continued  their  efforts  to  start  a 
run  on  the  Bank,  and  contributed  to  the  feeling  of 
insecurity,  that  soon  culminated  in  a  panic. 

All  during  1833,  the  Bank  sought  to  retrench, 
orders  being  given  to  restrict  discounts  and  to  cut 
off  extensions.  There  was  a  feeling  of  unrest  and 
uncertainty  throughout  the  mercantile  community, 
the  threat  of  the  removal  of  deposits  from  the  Bank 
having  seriously  affected  the  money  market.  When 
the  Bank  tightened  up  as  the  clouds  began  to  gather, 
it  was  accused  by  the  political  vandals  of  causing  the 
stringency,  merely  to  show  its  power.  The  business 
community  was  frightened  at  the  recklessness  of  the 
administration,  and,  as  has  been  said,  was  fearful 
of  the  result  of  Jackson  and  his  tricky  abettors,  such 
as  Amos  Kendall,  Isaac  Hill,  Reuben  Whitney  and 
others  of  the  "cabinet  improper, "  as  Webster  termed 
it,  seizing  the  Government  funds  and  distributing 
them  around  to  favorite  State  banks — if  it  were  not 
"robbing  the  Treasury  larder  for  his  kitchen  rats." 
The  average  monthly  balance  in  the  Bank  credited  to 


THE  STORY  OF  A  BANK  149 

the  Treasury  from  1818  to  1833,  was  $6,700,000.  In 
1832  it  was  $11,300,000,  and  in  1833,  $8,500,000.  In 
September,  1833,  the  amount  was  $9,100,000,  and 
January  1,  following,  only  $850,000,  which  was  not 
entirely  paid  out  till  late  in  1835.  A  recollection  of 
the  evils  that  accumulated  after  the  expiration  of  the 
first  Bank,  and  a  fear  of  a  repetition,  worked  as  a 
blight  on  confidence.  Horace  Binney  expressed  it 
thus: 

"It  is  here  we  find  that  pregnant  source  of  the 
present  agony — it  is  the  clearly  avowed  design  to 
bring  a  second  time  upon  this  land  the  curse  of  an 
unregulated,  uncontrolled  State  bank  paper  curren- 
cy. We  are  again  to  see  the  drama  which,  already 
in  the  course  of  the  present  century,  has  passed  before 
us,  and  closed  in  ruin.  If  the  project  shall  be  success- 
ful, we  are  again  to  see  these  paper  missiles  shooting 
in  every  direction  through  the  country — a  derange- 
ment of  values — a  depreciated  circulation — a  sus- 
pension of  specie  payments, — then  a  further  extension 
of  the  same  detestable  paper,  with  failures  of  trade 
and  failures  of  banks  in  its  train — to  arrive  at  last 
at  the  same  point  from  which  we  departed  in  1817." 

Kendall,  then  Fourth  Auditor  of  the  Treasury,  was 
commissioned  to  visit  local  banks  and  effect  arrang- 
ments  for  their  receiving  the  Government  deposits. 
The  contract  which  he  presented  provided  that  each 
bank  should  receive  all  deposits  offered  it  by  the 
Treasury,  whether  in  coin,  notes  of  the  Bank  of  the 
United  States  or  its  branches,  notes  of  any  neighbor- 


150  THE  STORY  OF  A  BANK 

ing  bank  convertible  into  coin,  or  notes  of  any  bank 
which  the  depository  bank  was  in  the  habit  of  re- 
ceiving. If  deposits  exceeded  one-half  of  the  capital 
of  the  bank,  or  if  for  any  other  reason  the  Secretary 
thought  necessary,  the  bank  was  to  give  collateral 
security  for  the  deposits.  Weekly  reports  were  to 
be  made  to  the  Secretary  of  the  Treasury.  Transfers 
of  deposits  were  to  be  made  without  charges,  and 
the  banks  were  to  furnish  the  Secretary  with  ex- 
change on  London  at  the  current  price.  The  Secre- 
tary reserved  power  to  discharge  the  bank  at  his 
own  discretion.  Twenty- three  of  these,  selected  by 
Kendall,  finally  were  chosen,  one  rejected. 

It  was  feared  by  Taney  that  the  Bank  would 
attempt  to  retaliate  on  the  chosen  banks  by  calling 
their  bills,  and  he  placed  large  drafts,  amounting  in 
all  to  $1,500,000,  on  the  big  Bank  in  the  hands  of 
the  new  depositories  at  New  York,  Philadelphia  and 
Baltimore,  to  offset  if  found  necessary,  but  otherwise 
as  he  is  understood  to  have  ordered,  not  to  be  used. 
The  National  Bank  took  no  steps  which  offered  even 
a  pretext  for  the  use  of  these  drafts;  but  the  president 
of  the  Union  Bank  of  Maryland  cashed  one  of  them 
for  $100,000  a  few  days  after  it  came  to  him  and  used 
the  proceeds  in  stock  speculation.  It  is  illustrative 
of  the  conditions,  moral  and  political,  then  existing 
that  under  orders  of  the  Executive,  this  scandal  was 
for  the  time  covered  up,  but  it  finally  came  out,  and 
was  the  subject  of  an  investigation  by  Congress. 
Taney  was  a  stockholder  in  this  bank.  The  Man- 


THE  STORY  OF  A  BANK  151 

hattan  Company,  New  York,  also  cashed  one  of 
these  emergency  drafts,  this  one  for  $500,000.  The 
"pet  banks"  evidently  felt  that  they  were  at  last  to 
have  their  innings — a  fine  proof  at  the  start  of  their 
alleged  greater  trustworthiness!  (Sumner.) 

Taney's  wicked  intent  which  prompted  the  placing 
of  these  heavy  drafts  is  shown  in  the  fact  that  the 
Bank  was  not  advised  about  them.  Before  this  it 
had  been  furnished  with  a  weekly  list  of  Treasury 
drafts,  and  also  a  daily  list  of  all  warrants  out.  The 
drafts  were  all  cashed  but  one,  Biddle,  after  he  learned 
about  them,  insisting  that  the  one  held  in  the  Girard 
bank,  being  for  $500,000,  should  be  paid,  for  fear 
it  might  turn  up  at  one  of  the  remote  branches. 
Miles  is  quoted  as  authority  that  the  supporters  of 
Jackson,  in  their  efforts  to  cripple  the  Bank  advised 
the  collection  and  presentation  for  payment  in  coin 
of  the  notes  of  the  Bank  in  large  amounts. 

Kendall's  mission  to  the  local  banks  did  not  prove 
as  satisfactory  as  the  removal  advocates  hoped, — in- 
deed it  was  considered  by  Duane  as  a  failure.  And  if 
the  Treasury  had  rigorously  insisted  on  a  compliance 
with  the  requirements,  it  is  hardly  likely  that  the 
transfer  could  have  been  accomplished.  But,  as  will 
appear,  the  Treasury,  under  the  inspiration  of  the 
President,  practised  great  leniency  toward  its  new 
depositories. 

As  a  reward  for  his  usefulness  in  capacities  requir- 
ing an  easy  conscience,  Reuben  Whitney  was  now 
given  the  post  of  Agent  for  the  new  depositories  in 


152  THE  STORY  OF  A  BANK 

their  dealings  with  the  Treasury.  Of  course,  they 
soon  complained  of  his  methods,  but  he  continued 
to  1837,  when  an  investigation  exposed  him  as  a 
disreputable.  From  correspondence  between  him 
and  the  banks,  then  published,  it  is  plain  that  the 
chief  requirement  of  an  applicant  for  deposits,  or 
other  favors,  was  political  support  of  the  Jackson 
administration,  and  enmity  to  the  United  States 
Bank.  Truly  additional  testimony  to  the  sincerity 
of  that  Administration  in  its  oft-expressed  desire  to 
maintain  political  purity! 

After  Jackson's  re-election,  he  could  logically  claim 
that  the  people  were  with  him  in  his  war  on  the 
Bank,  and  that  it  was  plain  they  did  not  want  it  re- 
chartered.  He  had  received  the  support  of  the  un- 
reasoning class,  which  was  naturally  prejudiced,  and 
which  was  pleased  with  Jackson's  spectacular  fight; 
the  support  of  the  local  bank  interests,  and  of  the 
large  class  that  had  no  interests.  None  of  these  had 
considered  the  probable  cost.  So  long  as  the  demon 
of  "monopoly"  was  being  strangled  perhaps  they 
did  not  care  what  the  consequence  might  be.  The 
question  of  the  errors  and  transgressions  of  the  Bank, 
such  as  they  were,  did  not  play  much  of  a  part — it 
would  have  been  the  same  if  the  Bank  had  been 
faultless  in  all  things.  Its  crime  lay  in  its  very 
nature. 

The  Bank  did  not  let  Jackson's  defamatory  paper 
of  September  18,  1833,  pass  unanswered.  The 
directors  some  time  later  issued  a  report  replying  to 


THE  STORY  OF  A  BANK  153 

his  accusations  point  by  point.  As  for  the  charges 
of  corrupting  Congressmen  and  newspapers,  which 
had  been  made  on  information  from  some  of  the 
Government  directors,  an  apparently  candid  ac- 
knowledgement was  made  of  such  expenditures  as  the 
Bank  had  incurred  in  its  self  defense,  and  the  amount 
was  given  at  $58,000.  This  figure  was  questionable, 
and  of  course  depended  on  what  items  it  was  made 
to  include;  but  up  to  this  time  it  is  not  likely  that 
such  expenditures  had  affected  its  soundness. 

The  Congressional  session  of  1833-34  was  a  seeth- 
ing one.  The  Senate  refused,  25  to  20,  to  consent  to 
the  appointment  of  the  Government  directors,  who 
had  acted  in  the  supposed  capacity  of  Presidential 
spies.  Jackson  sent  in  their  names  again  with  a 
characteristic  scolding  Message — the  Senate  rejected 
them  again,  30  to  11.  Taney's  appointment  as  Sec- 
retary of  the  Treasury  was  rejected.  He  was  then 
nominated  for  the  Supreme  Court,  and  that  was  re- 
jected. Jackson  sent  in  a  Message  complaining  that 
the  Bank  retained  possession  of  the  books,  papers 
and  funds  of  the  Pension  agency.  The  Senate  voted, 
26  to  17,  that  the  Secretary  of  War  had  no  authority 
to  remove  the  pension  funds  from  the  Bank.  This 
had  previously  been  clearly  shown,  and  Jackson's 
action  indicates  that  he  had  an  idea  that  he  could 
assume  authority  to  suspend  or  change  statutes  at 
will — which  should  cause  little  wonder  when  he 
claimed  similar  power  over  the  Constitution. 

In  December,  Clay  got  a  resolution  adopted  calling 


154  THE  STORY  OF  A  BANK 

for  the  paper  which  Jackson  read  to  his  Cabinet 
taking  on  himself  the  responsibility  for  the  deposit 
removals.  The  President  refused,  with  the  state- 
ment that  he  had  yet  to  learn  that  Congress  had  any 
authority  over  communications  made  by  the  Execu- 
tive to  the  Cabinet.  Clay  then  introduced  a  reso- 
lution which  finally  took  this  form:  "Resolved — 
First,  that  the  President  in  the  late  Executive  pro- 
ceedings in  relation  to  the  public  revenue  has 
assumed  upon  himself  authority  and  power  not 
conferred  by  the  Constitution  and  the  laws,  but  in 
derogation  of  both.  Second — that  the  reasons 
assigned  by  the  Secretary  for  the  removal  of  the 
deposits  are  unsatisfactory  and  insufficient."  Web- 
ster reported  this  resolution  from  the  Committee 
on  Finance  and  it  was  adopted,  the  second  section 
first,  28  to  18,  and  later  the  first  section,  26  to  20. 

Of  course  this  censure  could  not  pass  without  a 
counter  from  the  President's  friends,  and  Benton 
offered  a  resolution  that  Biddle  should  be  called  to 
the  bar  of  the  Senate  to  give  reasons  for  the  recent 
curtailments  of  the  Bank's  loans  and  for  using  its 
funds  in  the  election.  It  was  not  passed.  The 
President's  wrath  was  now  mingled  with  a  'feeling 
that  his  honor  had  been  wounded.  It  was  no  trifl- 
ing matter  to  have  such  a  censure  stand  on  the 
records  of  the  Senate.  He  replied  to  it  with  an  earn- 
est protest,  declaring  the  act  was  an  invasion  of 
Executive  rights;  but  the  Senate  refused  to  receive 
the  protest,  27  to  16;  answering  that  it  was  a  breach 
of  privilege. 


THE  STORY  OF  A  BANK  155 

Benton  soon  offered  a  resolution  to  expunge  the 
resolution  of  censure  from  the  records  of  the  Senate, 
and  this  started  a  struggle  with  which  the  country 
was  agitated  for  two  years.  A  regular  campaign 
was  organized  in  support  of  Benton's  resolution, 
joined  in  by  all  of  the  Jackson  party  and  press. 
In  1836,  the  personnel  of  the  Senate  had  changed  to 
the  extent  of  placing  Jackson's  adherents  in  control, 
and  the  resolution  was  expunged  with  melodramatic 
ceremonies.  But  before  this,  the  fight  was  so 
vindictive  as  in  some  places  to  appear  humorous.  A 
rumor  circulated  that  Jackson  would  issue  a  procla- 
mation against  the  Senate  and  make  a  call  for  troops; 
while  McDuffie  took  it  seriously  enough  to  declare 
that  200,000  men  would  rally  to  its  defense. 

In  the  House,  Polk  reported  from  the  Committee 
of  Ways  and  Means,  March  4,  1834,  supporting  the 
President  and  Secretary  of  the  Treasury  in  all  their 
actions  concerning  the  deposits.  He  offered  four 
resolutions,  all  passed  April  4, — first,  that  the  Bank 
ought  not  to  be  re-chartered,  132  to  82;  second,thatthe 
deposits  ought  not  to  be  restored,  118  to  103;  third, 
that  State  banks  ought  to  be  the  depositories  of  the 
public  funds,  117  to  105;  fourth,  that  a  select  commit- 
tee should  be  raised  on  the  Bank  and  the  commercial 
crisis,  171  to  42.  This  committee  of  seven  members 
was  appointed  and  endowed  with  inquisitorial  powers, 
which  J.  Q.  Adams  characterized  as  unjust  and  un- 
American.  One  could  have  foretold  that  the  Bank 
would  treat  such  a  committee,  under  the  circumstan- 


156  THE  STORY  OF  A  BANK 

ces,  cavalierly.  It  drew  a  line  beyond  which  it 
would  not  divulge  the  business  of  the  Bank,  and  the 
committee  stretched  the  truth  by  reporting  back, 
that  it  had  resisted  all  their  attempts  to  investigate. 
The  majority  was  for  having  the  directors  arrested 
and  brought  to  the  bar  of  the  House.  The  minority 
justified  the  Bank  in  its  position  and  criticised  the 
line  of  examination  that  had  been  attempted,  which 
was  to  find  something  to  support  charges  made  at 
random,  rather  than  to  discover  and  report  the  facts. 
The  committee  had  objected  to  having  the  Bank 
officers  present,  intending  to  make  a  secret  examina- 
tion, not  only  of  books  and  papers,  but  of  employes. 
Being  denied  this  opportunity,  the  committee  took 
a  room  at  a  hotel  and  ordered  the  books  and  docu- 
ments of  the  Bank  brought  there.  This  was  imprac- 
ticable, and  the  request  was  refused.  Biddle  offered 
to  submit  to  an  investigation  as  to  whether  the  Bank 
had  violated  its  charter,  and  claimed  the  committee 
had  no  authority  to  go  further. 

And  yet  another  investigation.  June  30,  the 
Senate  instructed  its  Committee  on  Finance  to  inves- 
tigate all  the  allegations  made  by  Jackson  and  Taney 
in  justification  of  the  deposit  removals.  It  was 
regarded  as  a  friendly  committee,  and  there  was  no 
clash  with  the  managing  committee  of  the  Bank,  as 
there  had  been  when  Mr.  Folk's  inquisitive  seven 
looked  in.  In  fact  it  appears  that  the  courtly  sena- 
tors were  permitted  to  do  as  much  searching  and 
quizzing  as  they  pleased.  There  was  talk,  before 


THE  STORY  OF  A  BANK  157 

and  after  this  time,  of  certain  senators  being  retained 
by  the  Bank,  and  of  others  having  intimate  business 
relations  there;  and  it  is  not  improbable  that  some 
of  the  members  of  these  various  investigating  com- 
mittees were  influenced  by  such  relations.  But  it 
must  be  considered,  that  there  were  the  most  hostile 
spirits  on  those  committees  also,  and  that  they  were 
not  forcibly  blindfolded.  In  this  last  senatorial 
probe  it  is  not  at  all  warrantable  to  assume  that  all 
those  who  assisted  in  it  were  corrupted.  John  Tyler 
was  at  the  head  of  it,  and  he  was  not  an  enthusiastic 
Bank  partisan;  on  the  contrary,  he  was  opposed  to 
the  recharter,  but  he  believed  the  institution,  because 
of  the  vast  interests  involved  in  it,  should  be  treated 
reasonably. 

The  committee  reported  December  18,  1834.  Its 
production,  known  as  "Tyler's  report,"  is  of  more 
importance  than  most  of  those  resulting  from  other 
investigations.  It  dealt  with  the  historical  facts 
in  a  manner  that  it  seems  should  have  caused  the 
Bank  wreckers  to  pause  and  ponder.  But  it  was 
little  heeded.  It  found  for  the  Bank  in  practically 
all  of  its  conclusions,  having  failed,  as  all  its  prede- 
cessors had,  to  discover  any  evidence  of  real  viola- 
tions of  its  charter.  It  dealt  particularly  with  the 
then  general  cry  that  it  was  producing  financial  dis- 
tress wilfully  by  unnecessary  contractions.  It  had 
drawn  back  from  the  perilous  position  in  which  the 
operation  of  the  branch  drafts  placed  it  in  1832, 
and  had  improved  its  condition,  which  by  its 
October,  1833,  statement  was  strong. 


158  THE  STORY  OF  A  BANK 

Not  the  least  malevolent  of  the  President's  accu- 
sations had  been  this  one  of  causing  needless  dis- 
tress by  its  retrenchments.  It  will  not  be  forgotten 
that  he  had  a  short  time  before  charged  it  with 
recklessness  and  insolvency.  Yet  now  that  it  was 
drawing  in,  under  the  pressure  that  the  Administra- 
tion policy  had  brought  on,  he  writes:  "By  a  curtail- 
ment of  its  accommodations  more  rapid  than  any 
emergency  requires,  and  even  while  it  retains  specie 
to  an  almost  unprecedented  amount  in  its  vaults, 
it  is  attempting  to  produce  great  embarrassment  in 
one  portion  of  the  community;  while  through  presses 
known  to  have  been  sustained  by  its  money,  it 
attempts  by  unfounded  alarms  to  create  a  panic  in 
all." 

Is  not  this  testimony  that  the  Bank  was  sound, 
"with  specie  to  almost  an  unprecedented  amount  in 
its  vaults"?  And  as  if  this  were  not  brazen  enough, 
he  proceeds  to  declare  there  is  no  financial  panic 
despite  the  efforts  of  the  Bank  to  cause  one.  It 
seems  incredible  that  a  President  of  the  United 
States  could  so  completely  have  discredited  his  own 
utterances  and  so  have  exposed  the  impure  motives 
that  actuated  him,  as  Jackson  did  repeatedly  in  his 
conduct  toward  the  Bank,  and  have  retained  the 
respect  and  support  of  any  intelligent,  honest  person. 
It  can  be  accounted  for  only  by  the  recollection  that 
he  had  a  majority  of  the  newspapers  in  line,  either 
through  real  gratitude  or  from  "a  lively  sense  of 
favors  yet  to  come";  that  he  had  used  the  Govern- 


THE  STORY  OF  A  BANK  159 

ment  patronage  in  every  direction  and  to  the  fullest 
extent;  that  the  great  majority  of  the  people  got,  or 
wanted  to  get,  only  one  side  of  the  story,  and  that 
blind  prejudice  swayed  men  at  that  time  to  an  almost 
unbelievable  degree. 

If  there  was  no  panic  brewing,  how  was  it  that 
the  Secretary  of  the  Treasury  experienced  so  much 
difficulty  in  getting  local  banks  to  qualify  for 
receiving  the  public  funds? — as  he  did  from  the 
beginning  of  the  transfers.  Jackson  had  asserted, 
in  the  face  of  the  record  of  losses  by  the  Government 
through  numerous  failures  of  such  depositories,  that 
State  banks  of  undoubted  strength  would  as  readily 
perform  all  financial  functions  for  the  Government 
as  the  Bank  of  the  United  States.  To  be  sure, 
Benton  offered  a  luminous  explanation  of  their 
backwardness.  It  was  that  the  local  banks  were  now 
loath  to  receive  Government  deposits  out  of  fear 
that  Biddle's  Bank  would  turn  and  destroy  them — a 
hint  of  their  relative  strength  not  in  keeping  with 
the  other  assertion.  And  there  is  no  indication  that 
Benton  intended  it  as  a  joke. 

One  realizes  the  impudence  of  the  claim  that  the 
deposits  with  the  local  banks  was  intended  for  the 
public  weal,  only  by  remembering  the  conditions  that 
existed  before  the  Bank  was  organized,  and  the 
necessities  that  impelled  its  charter  by  the  Govern- 
ment,— conditions  which  every  prudent,  unbiased 
man  feared  would  be  repeated  if  the  Bank  should  be 
forced  out  of  existence.  It  cannot  be  assumed  that 


160  THE  STORY  OF  A  BANK 

Jackson  or  his  advisers  supposed  the  local  banks 
would  be  as  safe — they  had  the  record  of  losses 
which  the  Government  had  sustained  through  them. 
McGregor,  British  statistician,  says  that  "from  1811 
to  1830,  no  less  than  165  banks,  with  a  total  capital 
of  $30,000,000,  either  failed  or  discontinued  their 
business.  The  Treasury  had  about  $1,400,000  in 
them,  a  large  part  of  which  it  lost."  This  loss  accrued 
when,  from  1816,  deposits  in  those  banks  were  only 
at  points  where  the  National  Bank  did  not  have 
branches, — a  small  fraction  of  the  whole. 

A  report  of  February  12,  1821,  showed  that  the 
Treasury  had  $818,590  in  suspended  banks;  and  we 
have  Sumner  as  authority  for  the  statement  that  the 
Government  lost  before  1837  in  bank  notes  received 
(notes  of  banks  that  failed  to  pay)  $5,500,000;  and 
by  deposits  in  such  banks,  $900,000.  What  can  be 
said  for  the  sincerity  of  any  man  seeking  to  entrust 
all  the  public  funds  to  them? — or  for  the  sincerity 
of  the  men  who,  with  this  record  against  the  admir- 
able one  of  the  National  Bank  during  the  past  ten 
or  a  dozen  years,  professed  to  believe  they  were  the 
safer? 

The  ultimate  loss  was  even  greater.  Schouler,  in 
his  vivid  style,  says  that  (in  the  panic  of  1836-37) 
"the  trap  of  suspension  sprang  upon  nine  millions 
or  more  of  government  funds,  which  were  divided 
among  the  banks  of  twenty-six  independent  juris- 
dictions: or  rather  the  public  revenue  to  that  amount 
had  already  sunk  through  these  bottomless  coffers 


THE  STORY  OF  A  BANK  161 

into  the  common  bog  of  speculation.  The  statistics 
of  this  loss  were  highly  discreditable  to  the  govern- 
ment, indicating  gross  favoritism;  for  while  our 
Treasury  had  already  drained  out  nearly  all  the 
public  deposits  in  New  England  and  New  York 
banks,  the  remote  and  less  responsible  custodians 
of  the  southwest  had  been  left  with  large  funds  not 
drawn  upon.  A  Mobile  bank  led  the  list  with  over 
a  million  dollars  in  default  to  the  government,  and 
three  banks  of  Mississippi  and  Louisiana  stood  next, 

each  owing  eight  hundred  thousand 

By  the  time  these  pet  banks  had  completely  sus- 
pended the  general  government  was  in  great  dis- 
tress. " 


CHAPTER  VII 

IF    there    was    anybody    connected    with    the 
Treasury  Department  at  that  time  who  pos- 
sessed a  modicum  of  ability  as  a  financier,  he 
not  only  knew  what  caused  the  panic  of  1833- 
34,  when  it  came,  but  he  could,  if  he  had  cared  to 
take  the  risk,  have  foretold,  as  Banker  Bronson  did, 
about  what  would  happen. 

State  banks  everywhere  had  begun,  from  the 
moment  Jackson's  order  for  the  removal  of  the 
deposits  had  been  made,  to  train  for  the  competition 
for  them.  As  has  been  said,  it  was  not  considered 
necessary  for  "specie  banks"  to  carry  any  consider- 
able stock  of  specie.  But  now  under  the  require- 
ments precedent  to  administration  favors  they  began 
trying  to  strengthen  themselves  to  the  Treasury 
standard.  It  was  they  who  began  the  operation  of 
bank  contraction — naturally  enough.  This  started 
more  than  a  year  before  the  new  system  began  to 
operate  in  place  of  the  old.  In  the  process  of  realiza- 
tion, stocks  fell  20  to  50  per  cent.  In  February, 
1834,  sterling  exchange  was  down  to  98,  par  being 
108.  And  just  as  naturally,  when  the  United  States 
Bank  was  hit  by  the  order,  it  began  to  trim  sail. 
Borrowers  found  it  harder  to  collect  because  every- 
162 


THE  STORY  OF  A  BANK  163 

body  scented  trouble,  and  as  always,  under  such 
circumstances,  wanted  to  keep  his  money.  Credit 
contraction  ensued  through  all  mercantile  avenues. 
This  resulted  as  usual  in  a  sharp  shrinkage  in  prices 
and  a  great  sacrifice  to  effect  sales.  Commercial 
paper  rose  to  2  or  3  per  cent  a  month;  securities 
shriveled  in  price  in  keeping  with  other  things,  and 
this  more  than  other  causes,  started  failures  among 
the  local  banks.  In  New  York,  the  State  loaned  its 
stock  to  local  banks  to  ward  off  a  suspension  of 
specie  payments. 

The  Jackson  adherents  continued  their  usual 
process  of  reasoning,  by  saying  that  Biddle  was 
causing  all  the  trouble  in  order  to  force  a  renewal  of 
the  charter;  and  it  may  be  observed  now  that  when, 
a  few  months  later,  the  Bank  did  all  it  could  do  in 
the  way  of  discounts  and  accommodations  to  relieve 
the  distress,  Biddle  was  as  severely  blamed  by  these 
same  illogical  critics  for  contributing  to  the  specula- 
tion and  expansion  that  followed  a  year  or  two 
later.  The  statements  of  the  Bank  showing  a  sound 
condition  through  it  all,  were  pointed  to  as  a  proof 
of  panic-making  on  its  part.  In  eighteen  months, 
from  January,  1831,  to  July,  1832,  when  it  was 
working  hardest  for  a  renewal,  its  loans  increased 
$23,400,000.  That  was  an  evidence  of  merely  seek- 
ing popularity.  Incidentally  it  could  be  observed 
that  then  "times  were  good,"  business  was  active; 
the  notes  of  the  Bank  were  considered  as  good  as 
gold,  failures  were  few,  and  there  was  no  reason  for 


164  THE  STORY  OF  A  BANK 

any  one  to  be  discontented  over  economic  conditions. 
In  the  next  eighteen  months  the  Bank's  loans  were 
reduced  $21,900,000,  considerably  less  than  the 
increase  noted,  yet  it  was  declared  to  be  out  of 
revenge.  Then  in  the  next  six  months  its  loans 
increased  $19,600,000.  This  does  not  make  good 
evidence  for  those  who  censured  the  Bank  for  un- 
necessary severity.  Those  who  have  examined  the 
statements  far  back  find  that  there  had  previously 
been  similar  fluctuations.  (Sumner.) 

It  is  unnecessary  to  dwell  voluminously  on  the 
nature  and  extent  of  this  panic  of  1833-34,  which 
can  be  rationally  attributed  to  nothing  but  the  war 
waged  successfully  by  the  administration  against 
the  Bank.  Full  and  lively  accounts  of  it  are  given 
in  the  general  histories.  A  great  many,  no  doubt, 
were  much  worse  frightened  than  hurt,  but  at  the 
best  it  was  bad  enough.  Jackson  was  soon  bom- 
barded from  all  sides  with  calls  for  relief.  Immense 
petitions  were  sent  from  New  York,  and  hundreds 
of  other  places,  to  Congress;  large  delegations  of 
business  men  went  to  Washington  representing 
business  interests  irrespective  of  parties.  They 
presented  their  urgent  petitions  to  Congress,  and 
then  went  to  call  on  the  President,  urging  him  to 
replace  the  deposits  in  the  National  Bank — even 
local  banks  made  the  same  plea.  He  received  them 
like  a  mad  czar — told  them  to  go  to  the  "monster," 
to  Biddle — that  Biddle  had  all  the  money,  and  any- 
way, those  who  traded  on  credit  ought  to  break! 


THE  STORY  OF  A  BANK  165 

It  may  be  unfair  to  quote  statements  made  in  anger, 
but  these  are,  nevertheless,  indicative  of  the  Presi- 
dent's economic  notions.  He  said  Biddle  had  mil- 
lions of  specie  in  his  vaults  "lying  idle. "  On  Febru- 
ary 11, 1834,  in  answer  to  a  delegation  from  Philadel- 
phia, he  proposed  the  so-called  "hard  money" 
panacea,  and  from  his  talk  he  would  have  liked  to 
experiment  in  inducing  banks  to  raise  themselves 
up  to  a  specie  plane  where  they  would  issue  no  notes 
under  $20,  thus  forcing  coin  out  for  a  large  part  of 
the  circulation.  A  good  deal  was  said  about  this, 
and  a  number  of  other  schemes,  wise  and  otherwise, 
were  brought  forward.  Sumner  differentiates  them 
into  four  distinct  schools — the  national  bank  system, 
the  local  deposit  bank  system,  an  inconvertible 
treasury  note  system,  and  the  bullion  plan  of  Benton 
and  Jackson.  But  none  of  these  worked  any  relief 
for  the  present.  Failures  continued,  and  great  meet- 
ings were  held  in  the  large  cities,  attended  by  busi- 
ness men,  mechanics,  and  laborers.  At  some  of 
these,  divisions  were  made  by  occupations,  each 
getting  up  a  petition  and  going  on  to  Washington 
on  its  own  account.  There  were  tens  of  thousands 
out  of  employment,  and  during  the  winter  a  great 
deal  of  suffering  resulted.  The  Virginia  legislature 
passed  resolutions  censuring  the  President  for  his 
rash  act.  Some  of  the  resolutions  to  Congress 
prayed  to  have  the  Bank  rechartered.  A  count  was 
made  of  the  petitioners,  and  151,000  were  found  in 
favor  of  restoring  the  deposits,  to  17,000  who  were 
not. 


166  THE  STORY  OF  A  BANK 

If  the  panic  was  severe,  it  was  not  as  bad  as  some 
others  have  been,  because  it  did  not  last  as  long. 
The  curtailment  of  1833-34,  acted  as  a  purging  that 
made  the  patient  sick  for  a  brief  spell  and  left  him 
greatly  improved.  Most,  if  not  all,  of  the  banks 
were  pursuing  a  cautious  course,  the  larger  ones 
importing  silver,  and  the  ratio  of  circulating  paper 
to  specie  decreased.  It  seems  as  if  the  condition 
thus  brought  about  ought  to  have  been  more  en- 
during. But  in  a  year  or  so,  finding  that  affairs  were 
in  good  condition  again,  speculation  rapidly  in- 
creased. This  was  enhanced  by  the  transfer  of 
deposits  to  the  local  banks  which  sought  to  use 
them  at  the  largest  profit;  while  the  number  of 
local  banks  were  greatly  increased,  the  possibility  of 
securing  Government  funds  being  an  incentive.  This 
immediately  tended  to  inflation.  And  so  after  a 
brief  joy  of  recovery,  things  immediately  set  in  the 
wrong  direction  again,  and  kept  on  that  way  until 
they  culminated  in  the  larger  panic  of  1836-37;  in 
fact,  the  financial  disturbance  beginning  with  Jack- 
son's removal  order  ran  through  a  course,  with  short 
periods  of  respite,  of  nearly  ten  years. 

There  was,  as  indicated,  considerable  change  of 
opinion  during  the  first  part  of  the  panic,  and  if  an 
election  were  to  have  occurred  now  it  is  altogether 
probable  that  Jackson  and  his  policy  of  saving  the 
people  from  mammon  and  monopoly  would  have  been 
repudiated.  Jackson's  friends  even  advised  him  to 
recede;  Kendall  says,  that  at  one  time  it  looked  as 


THE  STORY  OF  A  BANK  167 

if  they  would  not  be  able  to  resist  the  pressure 
brought  against  them  in  favor  of  the  Bank.  But 
Jackson  was  true  to  his  record — the  fight  was  not 
yet  finished,  and  he  had  no  idea  of  retreating;  and 
his  doggedness  was  rewarded  by  seeing  the  Bank 
incur  disfavor  by  its  own  imprudent  acts.  He  was 
greatly  agitated  by  the  first  move  made  by  the 
Legislature  of  Pennsylvania,  toward  securing  the 
Bank  as  an  institution  of  that  State.  December 
20,  1833,  the  House  of  Representatives,  by  a  resolu- 
tion directed  its  Ways  and  Means  Committee  "to 
inquire  how  far  the  public  interests  might  be  pro- 
moted by  the  continuation  of  the  operations  of  the 
Bank  of  the  United  States  under  a  charter  from  this 
Commonwealth,  should  its  present  charter  not  be 
renewed  by  the  United  States."  The  committee 
did  not  report  very  favorably,  believing  that  under 
such  an  arrangement  it  would  run  down  to  a  level 
of  other  State  institutions,  and  so  would  not  regulate 
the  local  banks. 

March  18,  1834,  Webster  proposed  a  bill  provid- 
ing for  a  new  government  charter  for  six  years,  with 
a  bonus  to  the  government  of  $200,000  a  year,  the 
Bank  to  issue  no  bills  for  less  than  $20.  The  Bank 
men  would  not  support  it.  Both  Taney  and  Wood- 
bury  wrote  papers  giving  vague  outlines  for  a  new 
bank  system,  but  nothing  definite  was  done  with 
them;  and  it  is  reported  that  the  President  made  an 
attempt  to  put  his  propositions  into  concrete  shape, 
but  that  the  result  was  so  queer  that  even  the 


168  THE  STORY  OF  A  BANK 

"kitchen  cabinet"  did  not  approve  it,  and  it  never 
left  his  desk.  It  may  be  said  here  that  it  was  not 
till  1836  that  the  deposit  system  was  regulated  by 
law,  and  that  the  deposit  banks  treated  most  of  the 
regulations  with  indifference  without  experiencing 
much  trouble  from  Congress. 

It  is  probable  that  none  of  the  President's  other 
charges  against  the  Bank  finally  came  to  be  credited 
by  the  business  community — the  men  who  borrowed 
and  traded — to  the  extent  that  this  one  of  unneces- 
sary curtailment  of  loans  did.  It  was  not  believed  at 
first.  There  was  no  ground  for  it.  Intelligent  men 
foresaw  what  the  result  of  the  destructive  policy, 
particularly  that  of  deposit  transfers,  would  be; 
but  they  also  discerned,  after  the  panic  had  lasted 
for  several  months,  that  the  Bank  was  not  making 
the  effort  to  relieve  the  distress  which  they  believed  it 
could,  and  ought  to  make. 

There  was  another  element  that  had  its  effect — 
the  new  tariff  law,  with  its  new  system  of  paying 
duties.  Heretofore  the  importers  had  been  given 
six  months  time  to  meet  duty  payments,  but  now 
they  had  to  pay  at  once.  This  occasioned  an  in- 
creased demand  for  money,  just  when  it  could 
hardly  be  obtained  at  all.  The  Bank  had,  under 
the  first  pressure  of  the  panic,  acted  only  prudently, 
and  cannot  be  censured  for  regarding  its  own  safety 
as  paramount.  And  in  considering  its  policy,  it 
must  not  be  overlooked  that,  while  the  Government 
funds  had  been  taken  from  it,  the  hostility  of  the, 


THE  STORY  OF  A  BANK  169 

administration  had  in  no  measure  abated.  The 
President  was  in  a  rage  over  being  defeated  in  his 
illegal  attempt  to  take  the  pension  funds  from  the 
Bank,  and  to  stop  it  from  exercising  its  legal  functions 
in  relation  thereto.  During  the  contention  the  pay- 
ment of  certain  pensions  was  delayed,  and  Jackson 
managed  to  make  the  Bank  bear  the  blame,  although 
it  had  acted  in  the  right.  It  still  hoped  for  a  re- 
charter.  And  no  doubt  Biddle  believed  that  if  the 
agony  continued  till  Congress  met  in  the  fall  of 
1834,  it  would  listen  to  the  plea,  or  at  least  restore  to 
it  the  Government  deposits. 

Under  these  circumstances  it  is  not  unlikely  that, 
being  in  the  situation  of  a  badly  abused  institution, 
it  would  make  no  effort  to  .relieve  the  distress  that 
was  likely  to  result  in  this  victory.  It  seems  to 
have  been  at  this  point  that  Biddle  made  his  worst 
mistakes.  It  no  doubt  would  have  been  better 
policy,  so  far  as  public  sentiment  went,  to  have 
given  up  the  pension  funds.  He  and  the  directors 
cannot  be  blamed  for  a  feeling  of  anger  and  vindic- 
tiveness  for  the  imposition  they  had  suffered,  nor 
for  some  indifference  to  the  public  that  had  so  igno- 
rantly  applauded  the  President;  but  they  went  too 
far,  and  although  the  Bank  ceased  its  contraction  of 
discounts  in  July,  and  loaned  again  with  liberality, 
it  had  incurred  a  lack  of  confidence  which  it  never 
regained.  And  politically,  the  Bank's  cause  was 
unskilfully  managed  from  1832  to  1834. 

It  was  November  5,  1834,  when  Woodbury,  now 


170  THE  STORY  OF  A  BANK 

at  the  head  of  the  Treasury,  informed  the  Bank  that 
the  Treasury  would  not,  after  January  1,  1835, 
receive  its  branch  drafts.  It  was  in  vain  that  Biddle 
protested,  claiming  that  they  were  a  good  medium, 
both  legally  and  in  practical  finance.  In  his  Message 
of  1834,  the  President  kept  up  his  scolding,  repeated 
many  of  his  old  complaints;  recommended  that  the 
Bank's  notes  be  no  longer  received  by  the  Treasury, 
and  that  the  stock  owned  by  the  nation  should  be  sold. 
In  January  following,  Polk  introduced  a  bill  to  for- 
bid receipt  of  the  notes  of  the  Bank  unless  it  would 
at  once  pay  the  dividend  withheld  from  the  Govern- 
ment in  1833,  in  the  matter  of  the  French  draft.  No 
action  was  taken. 

The  severest  arraignment  that  Jackson  received 
for  his  wretched  policy  toward  the  Bank  and  his 
readiness  to  sacrifice  the  Government's  interests  in 
its  overthrow,  was  Clay's  speech  in  the  Senate,  in 
which  he  summed  up  the  case,  as  for  the  Govern- 
ment, as  follows : 

1 .  He  withdraws  the  public  moneys  from  where, 
by  his  own  deliberate  admission,  they  were  perfectly 
safe,  in  a  Bank  of  $35,000,000  of  capital  and  $10,000,- 
000  of  specie,  and  places  them  at  great  hazard  with 
banks  of  comparatively  small  capital  and  but  little 
specie. 

2.  He  withdraws  them  from  a  Bank  created  by, 
and  over  which  the  Federal  Government  had  ample 
control;  and  puts  them  in  other  banks,  created  by 
different  governments,  and  over  which  it  has  no 
control. 


THE  STORY  OF  A  BANK  171 

3.  He  withdraws  them  from  a  Bank  in  which  the 
American  people,  as  a  stockholder,  were  drawing  their 
fair  proportion  of  interest    accruing  on  loans,    of 
which  these  deposits  formed  the  basis;  and  puts 
them  where  the  people  of  the  United  States  draw  no 
interest. 

4.  From  a  Bank  which  has  paid  a  bonus  of  a 
million  and  a  half,  and  which  the  people  of  the 
United  States  may  now  be  liable  to  refund;  and 
puts  them  in  banks  which  have  paid  to  the  American 
people  no  bonus. 

5.  Depreciates  the  value  of  stock  in  a  Bank  where 
the    general    Government    holds    $7,000,000;    and 
advances  that  of  banks  in  whose  stock  it  does  not 
hold  a  dollar,  and  whose  aggregate  capital  does  not, 
probably,  much  exceed  that  very  $7,000,000. 

6.  And  finally  he  dismisses  a  Bank  whose  paper 
circulates,  in  the  greatest  credit,  throughout  the 
Union  and  in  foreign  countries,  and  engages  in  the 
public  service  banks  whose  paper  has  but  a  limited 
and  local  circulation  in  their  immediate  vicinities. 

All  this  without  taking  into  account  the  great 
ruin  that  was  brought  by  it  upon  the  people,  the 
bankruptcies,  the  miseries  of  the  unemployed  through 
the  panic,  and  the  unsettled  state  of  business  for 
years.  It  is  a  criticism  on  Clay's  speech,  that  he  in- 
dulged in  too  much  invective,  calling  upon  the  people 
to  tremble  at  the  usurpation  of  a  tyrant,  and  drew 
it  so  strong  that  the  effect  of  the  solid  part  of  his 
indictment  was  weakened.  Besides,  everybody 


172  THE  STORY  OF  A  BANK 

knew  that  he  was  animated  largely  by  political  dis- 
appointment. But  there  was  no  answer  to  be  made 
to  his  counts  showing  how  the  Government  and 
people  had  been  worsted  in  order  to  make  Jackson's 
triumph. 

In  his  Message  for  1835,  Jackson  again  rambled  from 
the  path  of  truth  and  dignity  and  further  exposed  his 
malice  by  declaring  that  the  Bank  had  waged  war 
on  the  Government  for  four  years,  and  that  it  was 
part  of  the  system  of  distrust  of  the  "popular  will" 
and  of  a  power  which  sought  to  supplant  the  Federal 
system  with  a  consolidated  government.  But  as  a 
matter  of  fact  none  but  the  ignorant  now  regarded 
his  raging  at  the  Bank  as  anything  more  than  the 
angry  diatribe  of  a  malignant  old  partisan.  But 
the  action  of  Congress,  June  15,  of  this  year,  was  of 
more  importance,  as  it  repealed  the  fourteenth 
section  of  the  old  charter  making  the  notes  of  the 
Bank  receivable  at  the  Treasury — an  act  which 
could  not  but  detract  in  some  degree,  from  the  pres- 
tige of  the  Bank's  circulation. 

At  the  session  1835-36,  an  act  was  also  passed  for 
regulating  the  local  banks  of  deposit,  and  the  distri- 
bution of  surplus  funds  to  the  States.  The  latter 
were  to  be  as  deposits  subject  to  call,  to  avoid  con- 
sititutional  impediments.  Jackson  did  not  veto 
this  because  of  doubtful  constitutionality.  If  the 
public  deposits  in  any  bank  ever  exceeded  one- 
fourth  of  its  capital,  it  was  to  pay  2  per  cent  on  the 
excess  and  to  give  collateral  security  for  deposits, 


THE  STORY  OF  A  BANK  173 

if  the  Secretary  of  the  Treasury  should  call  for  it. 
The  surplus  money  in  the  treasury,  January  1,  1837, 
amounted  to  over  $5,000,000,  and  this  was  to  be 
deposited  between  the  States  in  proportion  to  their 
membership  in  the  Electoral  College,  the  States  to 
give  negotiable  receipts,  payable  to  the  Secretary  or 
his  assigns  on  demand.  This  had  to  be  withdrawn 
from  banks  that  had  it  loaned,  and  paid  over  to  others 
within  one  year.  The  curtailment  which  this  neces- 
sitated helped  to  bring  about  the  panic  of  1836-37. 
There  was  a  very  eager  competition  between  the 
States,  and  the  Secretary  complained  of  much  im- 
portuning from  Congressmen  seeking  favors  for  their 
banks.  All  told,  he  redistributed  over  $60,000,000, 
and  in  his  system  of  equalization  withdrew  $18,000,- 
000  from  banks  where  States  had  more  than  their 
proper  share.  The  folly  of  this  distribution  of  public 
funds  on  a  political  basis,  without  regard  to  the  com- 
mercial necessities  of  the  various  districts,  could 
not  but  have  its  ill  effect,  and  was  criticized  by 
Biddle  as  an  ignorant  blunder;  but  it  was  popular — 
it  pleased  the  people.  According  to  the  economic 
theories  governing  the  Administration,  it  ought  to 
have  resulted  in  nothing  but  good. 

The  Bank  was  now  proceeding  to  wind  up  its 
business.  Fifteen  of  the  branches  had  been  sold. 
There  was  no  talk  of  it  getting  a  charter  from  Pennsyl- 
vania heard  till  late  in  1835.  In  January,  1836,  two 
members  of  the  Legislature  sent  Biddle  a  letter 
asking  him  what  would  be  the  main  features  of  a 


174  THE  STORY  OF  A  BANK 

charter  which  would  be  satisfactory  to  him.  Neither 
the  State,  nor  Philadelphia,  wanted  to  lose  the 
"monster"  bank.  There  was  great  rivalry  between 
Philadelphia  and  New  York,  and  already  talk  was 
heard  of  a  $50,000,000  bank  at  the  latter  place. 
Even  after  the  fate  of  the  United  States  Bank  had 
been  sealed,  New  York  twice  called  on  it  for  emer- 
gency help — in  December,  1835,  after  a  great  fire, 
and  in  May,  1836,  during  the  financial  stringency. 
The  Bank  advanced  $2,000,000  to  the  New  York 
insurance  companies  to  settle  fire  losses,  which  they 
probably  could  not  have  obtained  elsewhere. 

Terms  having  been  agreed  upon,  the  Pennsylvania 
Legislature  passed  the  act,  February  18,  1836,  giving 
the  Bank  a  charter  under  that  State.  It  was  a  com- 
bination act,  containing  besides  the  charter  pro- 
visions, tax  remission  clauses  and  provisions  for 
public  improvements.  It  was  a  common  thing  in 
practically  all  the  States  to  mulct  the  banks  for 
public  improvements,  or  education  or  charitable 
enterprises,  although  it  was  regarded  as  a  bonus 
exacted.  That  there  were  private  interests  being 
served  all  along,  which  assisted  greatly  in  having 
the  charter  granted,  was  well  known,  but  it  was  a 
form  of  "corruption  of  the  people,"  which  did  not 
seem  to  trouble  the  occupant  of  the  White  House — 
when  any  but  the  national  Bank  was  concerned. 

The  new  charter  was  for  thirty  years,  under  the 
style  of  the  United  States  Bank  of  Pennsylvania. 
Under  its  terms  it  was  to  pay  a  bonus  of  $2,500,000, 


THE  STORY  OF  A  BANK  175 

pay  $100,000  a  year  for  twenty  years  for  schools, 
should  grant  the  State  not  over  $1,000,000  in  tem- 
porary loans  at  4  per  cent,  and  $6,000,000  on  State 
bonds  payable  in  1860,  at  4  per  cent;  should  sub- 
scribe $640,000  to  railroads  and  turnpikes,  and 
should  issue  no  notes  smaller  than  $10.  It  is  inter- 
esting to  note  that  by  this  act  personal  taxes  were 
repealed,  the  Bank  money  being  counted  upon  in 
their  stead;  and  $1,368,147  was  apportioned  out  of 
the  bonus  for  various  canals  and  turnpikes.  The 
vote  in  the  Senate  was  19  to  12,  in  the  House  57  to  30. 
The  Whigs  had  a  majority  of  44  in  the  House,  the 
Democrats,  5  in  the  Senate.  Charges  of  bribery 
were  immediately  heard,  under  the  assumption  that 
the  Democrats  could  not  otherwise  have  been  in- 
duced to  give  a  majority  vote.  A  member  of  the 
House  who  made  such  an  accusation  was  after  an 
investigation  called  to  the  bar  of  the  House  and 
reprimanded  for  "talking  to  mislead  public  senti- 
ment at  the  expense  of  the  character  and  reputation 
of  the  Legislature  and  Commonwealth. " 

Another  investigation  was  ordered  at  the  next 
session  of  the  Legislature,  but  nothing  very  dis- 
creditable was  discovered.  Most  people  believed 
the  State  had  made  a  good  bargain,  and  that  the 
Bank  was  paying  liberally  for  its  charter.  The 
shareholders  were  also  satisfied,  the  charter  being 
accepted  two  days  after  its  passage,  and  the  stock 
went  up  to  126.  Biddle  declared  at  this  time  that 
the  surplus  of  the  Bank  was  sufficient  to  pay  all  the 


176  THE  STORY  OF  A  BANK 

sums  which  the  charter  imposed  on  it.  All  the  assets 
of  the  old  Bank  were  turned  over  to  the  new  one, 
March  2,  1836,  under  condition  that  the  latter 
should  assume  all  obligations  existing.  Biddle's 
salary  was  fixed  at  $8,000  per  year,  a  rather  astonish- 
ing figure  compared  with  salaries  paid  to  bank 
presidents  in  these  days.  The  new  corporation 
became  trustee  for  the  old,  and  Mathew  Bevan  now 
became  president  of  the  latter. 

June  23,  1836,  Congress  authorized  the  Secretary 
of  the  Treasury,  to  negotiate  with  the  Bank  for  the 
payment  of  the  $7,000,000  of  stock  held  by  the 
Government,  but  no  agreement  was  reached.  Early 
in  the  following  year  the  Bank  sent  a  voluminous 
memorial  to  the  speaker  of  the  House,  submitting  an 
offer  to  liquidate  the  Government  shares  at  $115.58, 
for  each  $100;  payments  to  be  in  four  installments, 
September  1837,  1838,  1839,  1840.  The  offer  was 
accepted  and  payments  were  made  accordingly. 
At  the  same  time  the  Bank  sold  new  shares  in  Eng- 
land at  25  pounds  sterling,  and  thus  made  a  gain  by 
the  transaction.  The  Government  made  another 
effort  to  collect  the  dividends  withheld  because  of 
the  French  draft,  but  did  not  succeed.  All  this 
indicates  that  at  this  time  the  Bank  was  in  sound 
condition.  It  had  a  comfortable  surplus,  although 
it  had  experienced  an  appreciable  lowering  of  its 
prestige  by  its  change  to  a  State  bank,  as  well  as 
by  the  stormy  incidents  of  the  panic.  Under  the 
new  charter  it  had  3,417  stockholders.  In  Pennsyl- 


THE  STORY  OF  A  BANK  177 

vania  there  were  590,  other  United  States  citizens 
2,267,  and  foreigners  560.  The  latter  had  $9,100,000, 
out  of  the  $28,000,000  paid  capital.  There  was, 
however,  a  weak  spot  in  its  condition.  In  March, 
1836,  the  loans  made  by  the  Exchange  Committee 
to  the  officers  of  the  bank  and  to  the  favored  circle 
connected  with  it  amounted  to  $6,200,000.  The 
same  date  one  year  later  these  loans  reached 
$8,100,000.  In  the  list  of  bills  receivable,  January 
1,  1837,  it  appears  that  twenty-one  individuals, 
firms,  and  corporations,  each  owed  $100,000  or 
upwards,  although  this  does  not  necessarily  indicate 
unusual  danger  of  loss. 

The  National  Bank  established  twenty-six 
branches,  although  it  operated  only  twenty-five  at 
any  one  time.  Sixty-three  applications  for  branches 
were  refused  during  its  career.  The  branch  presidents 
were  selected  from  among  the  local  directors.  The 
assistant  cashier  usually  came  from  the  head  office. 

As  to  the  local  banks,  which  had  received  the 
Government  deposits,  there  were  by  June  1,  1836, 
eighty  of  them,  and  the  amount  of  money  they  held 
was  steadily  increasing.  Their  combined  capital 
was  $46,400,000,  loans  $71,200,000,  domestic  ex- 
change $41,000,000,  private  deposits  $16,000,000, 
specie  $10,400,000,  circulation  $27,900,000.  The 
total  specie  of  the  country  was  estimated  at  $64,000- 
000,  only  a  small  fraction  of  which  appears  to  have 
been  in  the  vaults  of  the  pet  banks. 

This  shows  at  a  glance  the  nature  of  the  "mono- 


178  THE  STORY  OF  A  BANK 

poly  "  which  the  Bank  of  the  United  States  exercised. 
There  were  at  this  time  some  six  hundred  or  more 
of  these  local  banks.  Yet  no  charge  had  greater 
force  with  the  people  than  that  it  was  a  monopolizer. 
This  was  only  true  in  the  sense  that  it  was  the  only 
National  Bank.  Its  interest  rate  was  restricted  to 
six  per  cent,  while  the  competing  banks  could  charge 
a  higher  rate;  the  legal  rate  iu  New  York  being  seven 
per  cent,  and  the  market  rate  throughout  the 
country  was  much  of  the  time  as  high  as  twelve  per 
cent.  The  effect  of  the  big  Bank  was,  of  course,  to 
make  money  cheaper  to  the  people  who  accused  it 
of  being  their  oppressor. 

Out  of  the  mass  of  details  which  it  is  necessary 
to  peruse  to  acquire  a  clear  understanding  of  the 
functions,  services,  and  conduct  of  this  Bank,  there 
are  a  few  facts  which  it  is  of  the  highest  importance 
to  bear  in  mind.  The  Bank,  during  nearly  the  whole 
of  its  existence,  was  the  specie  reserve  maintainer  of 
the  country.  The  other  banks  practically  unloaded 
specie  responsibility  upon  it,  and  in  stringent  times 
depended  on  it  for  unusual  demands  for  coin,  and 
to  preserve  specie  payments.  Its  gold  and  silver 
reserve — not  nominal  but  actual — was  always  much 
greater  in  proportion  to  its  circulation  than  that  of 
any  other  bank,  being  fixed  in  practice  at  one-third 
of  its  circulation,  but  much  of  the  time  it  was  in 
excess  of  this.  In  1833,  when  Jackson  was  pro- 
claiming it  unsafe  and  transferring  the  Government 
funds  to  local  banks,  it  had  in  circulation  $17,000,000, 


THE  STORY  OF  A  BANK  179 

and  specie  $9,000,000,  while  all  other  banks  had 
$68,000,000  of  notes  out  to  $10,000,000— $11,000,- 
000  coin  in  vaults, — this  according  to  the  Verplanck 
report  in  the  House  Record. 

Much  the  same  relative  conditions  existed  as  to 
loans  in  proportion  to  capital,  and  to  specie  as  well. 
The  largest  volume  of  discounts  the  Bank  ever  had 
at  one  time  was  $70,000,000,  or  twice  its  capital, 
not  counting  several  millions  of  surplus;  and  for  this 
it  was  censured;  while  other  banks  constantly  carried 
a  larger  proportion.  At  that  time  the  New  York 
banks  averaged  two-and-a-half  times  their  capital. 
It  was  under  bond,  as  has  been  stated,  to  maintain 
specie  payments,  being  subject  by  its  charter  terms 
to  a  penalty  of  twelve  per  cent  per  annum  on  all  notes 
and  deposits  not  redeemed  in  specie  on  demand. 
This  responsibility  resting  on  the  "monster"  seems 
not  to  have  been  understood  by  the  public  generally. 
The  great  lack  of  unity  between  it  and  the  State 
concerns — this  being  the  real  weakness  of  the 
system — often  resulted  in  a  forgetfulness  of  their 
mutual  interests;  and  the  inconsistency  of  the  people, 
as  has  been  observed,  led  them  to  blame  the  big 
Bank  for  not  lending  more  freely  in  times  of  strin- 
gency. It  was  most  of  the  time  the  creditor  of  the 
State  banks,  that  is,  it  held  more  of  their  paper  than 
they  held  of  its  paper.  That  was  probably  the  main 
object  of  its  being, — that  it  would  hold  other  banks 
from  over-inflation,  and  so  "preserve  a  sound  and 
uniform  currency."  Yet  in  doing  this  even  with 


180  THE  STORY  OF  A  BANK 

moderate  discipline,  it  was  denounced  as  a  "  tyrant. " 
In  all  payments  to  the  Government,  other  banks  had 
to  convince  the  Bank  of  the  United  States,  that  their 
notes  were  equivalent  to  specie.  Of  course,  the 
Bank  had  to  restrain  itself  at  all  times  to  hold  this 
commanding  position.  When  it  failed  in  this 
respect,  as  in  1818,  it  failed  to  maintain  specie  pay- 
ments. It  finally  lost  the  regulative  power  in  1832, 
when  its  loans  and  issues  became  excessive. 

Other  important  considerations  that  must  count 
weightily  in  the  summing  up  are  the  gains  and  losses 
accruing  to  the  Government  on  account  of  the  Bank. 
There  were  times  when,  if  one  listened  to  its  enemies, 
it  must  have  appeared  as  if  the  "vampire"  was  suck- 
ing the  life-blood  of  the  Government  as  well  as  of  the 
people.  The  reports  of  the  Government's  proportion 
of  the  losses  incurred  the  first  two  or  three  years  of 
the  Bank's  existence,  and  which  were  due  entirely 
to  the  fraudulent  manipulation  of  its  affairs  by  men 
who  had  been  given  place  in  its  management  more 
on  account  of  their  political  influence  than  for  their 
standing  as  bankers  or  financiers,  created  a  popular 
impression  that  it  was  a  losing  venture  for  the 
nation  which  probably  was  never  entirely  overcome. 
Yet  it  is  a  matter  of  clear  record  that  the  Govern- 
ment's gains  by  it  were  large.  During  the  seventeen 
years  that  it  was  the  national  depository,  the  public 
deposits  averaged  about  $28,000,000,  and  at  the 
average  exchange,  or  transfer  charges,  of  one- 
fourth  of  one  per  cent,  the  sum  saved  was  $60,186  a 


THE  STORY  OF  A  BANK  181 

year,  a  total  of  $1,023,161.  The  Bank  disbursed 
$30,000,000  as  commissioner  of  loans  and  pensions, 
at  a  saving  to  the  public  of  two  per  cent,  another 
$600,000.  It  paid  out  on  account  of  the  public 
debt  $200,000,000,  which,  estimated  on  the  basis  of 
the  cost  to  the  Government  before  the  Bank  was 
established,  saved  it  between  $500,000  and  $600,000. 
This  added  to  the  other  items  makes  a  total  of  at 
least  $2,120,000.  Mr.  Biddle's  estimates  of  the 
value  of  these  services  were  higher. 

At  the  start  almost  three-fifths  of  the  individual 
subscriptions  were  in  the  public  stocks,  and  one-fifth 
of  the  public  debt  was  absorbed  in  the  Bank's  capi- 
tal. When  the  shares  rapidly  appreciated,  the 
Government  took  advantage  of  its  right  to  purchase 
the  stock  at  the  subscription  price.  The  Govern- 
ment made  from  excess  of  dividends  over  interest 
(on  its  own  subscription)  and  the  advanced  price  of 
the  stock  at  which  it  finally  sold,  $6,093,167.07,  this 
according  to  a  report  of  the  Comptroller  of  the 
Currency  (Knox)  in  1876.  Added  to  the  $2,120,000, 
it  gives  a  grand  total  of  $8,193,167,  or  more  than 
six  per  cent  interest  on  the  Government  deposits. 
But  this  is  far  from  telling  the  whole  story  of  its 
benefits.  When  it  is  remembered — as  it  seems  never 
to  have  been  by  the  political  decry ers  of  the  institu- 
tion— what  the  experience  of  the  Government  was 
during  the  years  from  the  termination  of  the  first 
Bank  to  the  beginning  of  this  one,  its  value  of  what 
may  be  termed  an  intangible  kind,  must  be  reckoned 


182  THE  STORY  OF  A  BANK 

greater  than  that  which  is  shown  as  a  money  gain; 
and  it  will  be  observed  that  in  the  latter,  no  attempt 
is  made  to  figure  the  whole  profit  that  accrued  from 
the  appreciation  in  the  value  of  the  Government 
securities  and  the  absolute  security  of  its  funds. 

The  Government's  losses  by  local  banks  has  al- 
ready been  referred  to  (p.  160).  It  is  safe  to  say 
that  when  the  results  of  the  panic  of  1836-37,  caused 
by  the  Bank  war,  were  counted,  the  Government's 
losses  were  much  greater  than  the  $6,400,000  figured 
by  Sumner,  up  to  1837. 


CHAPTER  VIII 

THE  Bank  of  the  United  States  being  now 
no  longer  a  national  institution,  it  is  not 
intended  to  give  in  detail  the  successive 
steps  by  which  it  finally  fell  into  disgrace 
and  ruin.     Enough  will  be  related,  however,  to  show 
that  it  had  received  its  death  wound  in  the  contest 
with  Jackson,  and  that  without    reasonable  doubt 
the  expedients  which  it  was  forced  to  during  the 
years  of  conflict,  turned  the  management  to  the 
speculative  policies,  which  decided  its  fate. 

The  inflation  and  speculation  that  began  late  in 
1834  were  rampant  until  the  summer  of  1836,  when 
the  bubble  was  ready  to  burst  again.  Great  im- 
petus had  been  given  to  railroad  building,  and 
immense  amounts  of  their  shares  had  been  floated. 
There  had  also  been  a  rapid  multiplication  of  local 
banks  so  that  "in  order  to  take  the  place  of  one 
bank  with  $35,000,000,  which  after  all  did  not  go 
out  of  business,  there  were  organized  340  banks 
with  $99,000,000  capital."  The  mania  for  banks 
became  so  great  that  formal  riots  occurred,  and 
strong  men  were  hired  to  stand  in  line  when  sub- 
scriptions opened.  Many  subscribed  in  order  to 
sell  immediately  at  an  advance.  There  was  always 
183 


184  THE  STORY  OF  A  BANK 

hope  of  the  prospective  bank  becoming  a  Government 
depository,  "which  intensified  the  notion  already 
entertained  by  those  who  were  desperately  in  debt, 
that  the  best  way  to  escape  was  to  join  together 
and  make  a  bank."  Niles  is  quoted  as  saying, 
"to  make  a  bank  is  the  great  panacea  for  every  ill 
that  can  befall  the  people  of  the  United  States,  and 
yet  it  adds  not  one  cent  to  the  capital  of  the  coun- 
try." 

This  was  the  logical  effect  of  the  demagogic  utter- 
ances of  the  Executive  about  the  tyrannous  monopoly 
of  the  monster  which  drew  the  money  away  from 
the  people.  Now  that  the  monopoly  was  foiled, 
why  should  not  all  the  people  have  some  of  that 
bank  porridge  of  which  they  had  been  so  long  de- 
prived? It  was  a  fact  that  a  great  many  small 
subscribers  to  the  new  banks  believed  they  were  at 
last  coming  into  their  own.  They  believed,  too, 
that  the  processes  of  banks  created  wealth  and 
relieved  distress.  When  a  calamity  occurred  it  was 
at  once  suggested  that  a  bank  be  started  to  relieve 
it.  It  has  already  been  shown  how  banks  of  the 
State  were  started  to  lend  to  people  who  were  in 
debt  and  who  could  conveniently  endorse  for  each 
other.  It  was  easy  for  the  States  to  make  paper 
money,  to  pay  it  out  at  a  great  depreciation,  and 
to  take  it  back  at  its  face  value.  The  whole  system 
encouraged  improvidence  and  dishonesty,  giving  the 
impecunious  the  notion  that  they  were  under  neither 
legal  nor  moral  obligations  in  their  daily  transactions. 


THE  STORY  OF  A  BANK  185 

The  banks  that  got  the  Government  deposits  were 
actually  encouraged  by  Taney,  the  Secretary  of  the 
Treasury,  "to  loan  them  to  the  people."  It  may 
readily  be  guessed  that  they  needed  no  urging  to  go 
into  rash  operations,  loaning  on  anything  and  any- 
where that  brought  large  interest  rates.  Many 
banks  that  got  the  Government  deposits  under  this 
paternal  injunction  used  the  same  to  conform  to  the 
Treasury  requirements, — that  is,  to  put  themselves 
into  the  condition  required  under  the  Treasury  rules 
to  receive  deposits,  their  previous  statements  having 
been  fraudulent.  There  is  reason  to  believe  that 
the  Government  winked  at  these  evasions,  and  that 
as  a  rule  those  banks  that  were  culpable  were  in 
close  political  affiliation  with  it.  "To  get  into  the 
upper  circle  of  the  democratic  magnates  and  handle 
the  public  deposits  was  the  ruling  ambition,"  as 
Schouler  states  it. 

The  financial  storm  was  brewing  in  Great  Britain, 
as  well  as  in  America;  several  banks  over  there  with 
a  large  number  of  branches  failed.  The  Bank  of 
England  carried  several  that  would  otherwise  have 
dropped  out.  English  investors  had  gone  largely 
into  American  stocks,  having  been  favorably  im- 
pressed with  the  fact  that  the  national  debt  had 
been  entirely  paid.  Besides  over-estimating  the 
significance  of  this,  they  did  not  consider  the  dis- 
tinction between  the  nation  and  the  States,  many 
assuming  that  the  strength  of  the  former  was  re- 
flected in  the  latter.  They  learned  their  mistake 


186  THE  STORY  OF  A  BANK 

by  sad  experience.  Early  in  1836,  the  price  of 
cotton  fell  four  or  five  cents  a  pound  in  England, 
making  the  price  in  our  Southern  States  30  to  40 
per  cent  lower.  Those  who  had  bought  extensive 
cotton  lands  on  credit  found  themselves  unable  to 
make  payments,  and  the  first  failures  of  the  great 
panic  were  cotton  houses  in  New  Orleans.  The 
whole  cotton  belt  was  as  usual  in  debt  to  the  North 
and  East,  and  being  unable  to  settle,  the  credit  of 
the  Eastern  merchants  was  curtailed  in  England. 
Thus  the  entire  credit  system  of  the  two  nations 
was  badly  shattered. 

By  January,  1837,  a  number  of  banks  in  the  East 
refused  to  receive  on  deposit  checks  on  other  banks, 
and  in  that  month  the  Board  of  Trade  of  New  York 
memorialized  Congress  in  regard  to  the  deranged 
state  of  the  currency  and  exchanges,  asking  its 
interposition  to  remedy  the  matter.  The  Board 
also  urged  that  another  national  bank  should  be 
chartered,  particularly  for  the  reason  that  it  could 
regulate  the  local  banks.  "In  short,  such  an 
establishment  has  existed  and  is  familiar  to  the 
habits  of  the  country,  and  your  memorialists  desire 
nothing  better  than  to  return  to  that  system  under 
which  the  commerce  and  the  currency  so  long 
prospered. "  The  New  York  bankers  as  has  already 
been  noted,  turned  to  Biddle  for  help.  He  is  found 
going  to  New  York  and  increasing  their  discounts 
$1,500,000.  His  bank  issued  bonds  payable  in 
London  for  $5,000,000,  which  were  sold  for  bills 


THE  STORY  OF  A  BANK  187 

receivable  of  the  merchants  at  112^  to  enable  them 
to  meet  their  foreign  payments.  The  Bank's  shares 
then  stood  at  120.  The  Bank  also  engaged  in  cotton 
buying  and  undertook  the  hazard  of  caring  for  the 
crop.  This  venture  may  be  fairly  regarded  as  the 
beginning  of  those  reckless  operations  which,  to- 
gether with  its  heavy  volume  of  loans  on  internal 
improvement  stocks,  in  the  end  bankrupted  it. 

Knox  calls  attention  to  the  fact  that  the  Bank 
did  not  adopt  the  disastrous  policy  of  loaning  ex- 
tensively on  stocks  till  all  hope  of  a  re-charter  by 
the  Government  was  given  up;  and  then,  during 
1835  and  to  March,  1836,  such  loans  were  increased 
from  $4,800,000  to  over  $20,000,000,  the  securities 
being  largely  turnpike,  canal,  railroad  and  land  com- 
pany issues  guaranteed  by  the  States.  Like  most 
other  creditors,  home  and  foreign,  the  Bank  appar- 
ently was  deceived  in  believing  too  confidently  in 
those  enterprises  and  the  good  faith  of  the  States. 

Almost  as  soon  as  the  pressure  began,  the  deposit 
banks  showed  their  weakness  by  suspending  specie 
payments.  On  the  tenth  of  May,  all  the  New  York 
city  banks  did  so,  and  were  soon  followed  by  the 
Philadelphia  banks,  including  the  Bank  of  the 
United  States.  Biddle  has  been  criticised  for  taking 
this  step.  It  was  understood  that  in  the  summer  of 
1836,  he  hoped  the  Government  would  find  it  neces- 
sary to  return  to  his  Bank  to  transact  its  business. 
Good  authorities  have  declared  that  had  he  con- 
tinued specie  payments  a  month  after  the  other 


188  THE  STORY  OF  A  BANK 

banks  had  suspended,  he  would  have  forced  the 
administration  to  employ  his  Bank  under  the  law 
as  its  sole  fiscal  agent,  and  have  scored  a  grand 
triumph.  This  is  probably  true,  but  is  it  likely 
that  under  the  circumstances  he  could  have  held  on 
alone  for  a  month?  It  is  true,  Biddle  declared  that 
his  Bank  could  have  gone  on  paying  out  specie,  and 
he  excused  his  act  by  saying  that  as  others  had  to 
suspend,  he  thought  the  people  of  Pennsylvania 
should  not  be  compelled  to  pay  in  different  money 
from  those  of  other  States.  This  is  more  plausible 
than  explanatory  of  the  Bank's  real  condition. 

It  must  have  been  some  satisfaction  to  Biddle  to 
see  the  disappointment  and  humiliation  of  Jackson, 
when  the  deposit  banks  betrayed  him.  The  feeling 
of  the  administration  and  its  supporters  toward 
those  banks  was  extremely  bitter.  Many  felt  that 
the  Jackson  party  had  broken  down  the  big  Bank 
in  the  interest  of  the  local  institutions,  had  loaded 
them  with  favors  and  extended  them  every  opppor- 
tunity  to  justify  the  confidence  reposed  in  them, 
only  to  have  it  shown  that  they  were  ungrateful  and 
selfish.  Jackson  felt  the  disgrace  of  the  situation 
keenly.  He  wrote  July  9,  "The  history  of  the 
world  never  has  recorded  such  base  treachery  and 
perfidy  as  has  been  committed  by  the  deposit  banks 
against  the  Government,  and  purely  with  the  view 
of  gratifying  Biddle  and  the  Barings  and  by  the 
suspension  of  specie  payments,  disgrace,  embarrass 
and  ruin  if  they  could  then1  own  country."  A  year 


THE  STORY  OF  A  BANK  189 

before  the  Administration  had  been  severely  censured 
for  issuing  the  "specie  circular,"  which  was  Jack- 
son's idea,  although  Benton  had  previously  intro- 
duced a  resolution  for  a  similar  trial,  which  failed  to 
pass.  The  circular  was  an  order  from  the  Treasury 
Department,  directing  that  nothing  but  gold  and 
silver  should  be  received  in  payment  for  public  lands. 
The  President  intended  it  to  stop  inflation  and  to 
act  as  a  panacea  for  the  gathering  financial  ills. 
But  it  worked  adversely,  and  brought  out  such  a 
storm  of  protest  from  the  whole  business  community 
that  a  bill  was  passed  by  Congress  modifying  the 
order.  However,  Jackson  failed  to  sign  it.  A 
special  session  of  Congress  was  called  in  September 
to  consider  relief  measures.  In  his  Message  to  it, 
the  President  declared  that  while  the  local  banks 
had  for  a  while  fulfilled  the  uses  for  which  they  had 
been  selected,  "when  it  became  necessary  after  the 
Act  of  June,  1836,  to  withdraw  from  them  the  public 
money  for  the  purpose  of  placing  it  in  additional 
insititutions  or  of  transferring  it  to  the  States,  they 
found  it  in  many  cases  inconvenient  to  comply  with 
the  demands  of  the  Treasury,  and  numerous  and 
pressing  applications  were  made  for  indulgence  or 
relief."  As  a  matter  of  fact  the  Government  had 
large  surplus  funds  locked  up  in  the  suspended 
banks,  the  experiment  with  them  having  failed  on 
the  first  test.  It  was  in  this  Message  that  he  pro- 
posed the  independent  treasury  system,  with  gold 
and  silver  as  the  sole  medium  for  the  transaction  of 


190  THE  STORY  OF  A  BANK 

Government  business.  This  proposition  became  a 
leading  political  question  and  split  up  the  Democra- 
tic party.  It  was  supported  by  the  radical  or  loco 
foco  wing  and  opposed  by  the  more  conservative 
element. 

The  rise  of  the  loco  focos,  beginning  in  New  York, 
was  a  peculiar  incident  of  this  trying  period.  They 
threatened  the  public  peace,  and  finally  had  to  be 
subdued  by  the  militia.  They  declared  that  all  the 
banks  were  in  league  with  Great  Britain  and  the 
European  monarchies  to  plunder  free  Americans  by 
draining  off  their  gold.  At  one  time  they  declared 
all  banking  a  fraud,  and  at  another  meeting  resolved 
that  the  banks  ought  to  help  poor  men  to  emigrate, 
and  that  Congress  ought  to  donate  to  each  one  from 
80  to  200  acres,  according  to  his  needs.  Nor  was 
it  alone  they  who  proposed  visionary  schemes  for 
relief.  Public  meetings  were  held  all  over  the 
country,  and  the  expressions  of  the  people  as  a  rule 
showed  that  they  were  quite  as  unwise  in  planning 
remedies  as  they  had  been  in  their  agitation  in 
support  of  the  President's  policy  which  culminated 
in  the  crisis. 

A  good  deal  of  credit  was  given  Biddle,  after  the 
force  of  the  panic  was  broken,  for  saving  solvent 
merchants  in  Philadelphia,  and  assisting  New  York, 
as  previously  noted.  In  August,  1838,  a  branch  of 
the  Bank  was  re-established  in  New  York  under  the 
title,  Associates  of  the  United  States  Bank  in  New 
York.  It  was  afterwards  claimed  as  an  independent 


THE  STORY  OF  A  BANK  191 

concern.  It  loaned  the  State  $300,000  that  year 
to  repair  serious  damages  made  by  a  freshet  in  the 
Juniata  Valley,  and  took  its  chances  of  reimburse- 
ment from  the  Legislature.  It  was  freely  declared 
that  resumption  of  specie  payments  was  not  possible 
until  the  Bank  was  again  made  fiscal  agent  of  the 
Government.  Biddle's  influence  both  in  Philadel- 
phia and  New  York  was  yet  strong,  and  he  was 
regarded  by  many  as  a  great  financier  and  a  safe 
guide.  The  deposit  banks  resumed  slowly,  first 
with  small  notes.  Biddle  again  missed  his  oppor- 
tunity in  not  being  the  first,  nor  among  the  first,  to 
resume,  and  that  weakened  his  leadership.  After 
Congress  repealed  the  "specie  circular"  he  made 
it  a  cause  for  resumption,  which  was  characteristic 
of  his  plausible  nature.  It  is  probable  that  he  helped 
defer  resumption  as  long  as  possible. 

In  January,  1838,  Charles  Kuhn  attempted  to 
force  a  forfeiture  of  the  Bank's  state  charter  under 
that  section  of  it  which  provided  that  if  it  should 
ever  refuse  to  pay  any  of  its  obligations  in  specie, 
the  holder  thereof  might  apply  to  any  judge,  who 
should  give  ten  days  notice  of  a  trial,  and  if  the  fact 
was  substantiated,  should  so  certify  to  the  Governor. 
That  official  should  then  declare  the  charter  for- 
feited. During  the  ten  days'  delay,  the  Bank  paid 
the  note  held  by  Kuhn  with  12  per  cent  interest, 
and  it  was  held  that  the  former  owner  of  it  could  no 
longer  bring  about  a  forfeiture.  Kuhn  tried  again, 
but  failed  through  a  technicality. 


192  THE  STORY  OF  A  BANK 

One  thing  that  gave  great  dissatisfaction  was  the 
continued  circulation  of  the  notes  of  the  old  Bank. 
In  February,  1838,  the  Senate  Committee  on  the 
Judiciary  made  a  report  condemning  the  Bank  for 
keeping  these  notes  out,  and  submitted  a  bill  making 
it  a  misdemeanor  for  the  officers  of  any  bank  whose 
charter  had  expired  to  issue  its  notes,  punishable 
by  fine  not  exceeding  $10,000,  or  imprisonment  not 
exceeding  ten  years,  or  both.  The  prison  penalty 
was  changed  to  not  less  than  one,  nor  more  than 
five  years,  and  the  bill  passed.  Late  in  1838,  the 
Bank  was  reported  in  New  York  a  large  borrower  on 
its  post  notes,  and  it  was  this  season  that  it  went 
more  recklessly  into  cotton  operations  at  New 
Orleans.  Thomas  Biddle,  heretofore  referred  to,  was 
its  agent. 

It  established  an  agency  in  England  in  charge  of 
its  cashier,  Jaudon,  who  soon  incurred  the  enmity 
of  the  Barings,  and  the  Bank  of  England,  by  his 
operations.  The  Barings  refused  to  keep  their 
agreement  to  meet  the  drafts  of  the  Bank,  and  the 
Bank  of  England  refused  to  open  an  account  with 
them.  In  1839  there  were  short  crops  in  England, 
distress  in  the  mill  sections,  and  prices  of  cotton  fell. 
This  made  a  gloomy  outlook  in  the  South  and  West. 
On  March  29,  1839,  Biddle  resigned  the  presidency 
of  the  Bank,  and  always  claimed  afterward  that  it 
was  entirely  sound  at  that  time.  After  his  resigna- 
tion it  appeared  that  the  cotton  operations  showed 
a  profit  of  $1,400,000,  on  total  transactions  $8,900,- 


THE  STORY  OF  A  BANK  193 

000,  of  which  profit  $800,000  went  to  the  operators 
and  $600,000  to  the  Bank.  The  $800,000  was 
drawn  out  between  March  25  and  May  22.  It  was 
in  this  year  that  the  Bank  loaned  $1,000,000  to  the 
State  of  Illinois,  which  was  spent  on  the  Illinois  and 
Michigan  Canal. 

October  9,  1839,  the  Bank  failed  on  its  own 
obligations,  all  the  Philadelphia  banks  undergoing 
runs.  The  stock  of  the  Bank  fell  to  93%,  and  its 
notes  were  at  11  per  cent  discount  in  New  York. 
It  became  known  that  the  Bank  had  continued  to 
borrow  and  expand  in  spite  of  losses  which  it  con- 
cealed by  absence  of  official  reports,  and  besides 
these  losses,  a  large  amount  of  its  means  were  in 
inconvertible  securities.  After  a  partial  readjust- 
ment the  Bank  continued  in  a  crippled  condition, 
and  with  greatly  weakened  confidence.  From  the 
time  it  went  under  the  State  charter  it  had  paid  a 
4  per  cent  dividend  semi-annually  up  to  July,  1839. 
The  regular  dividends  deluded  small  investors  after 
the  wise  ones  became  aware  that  it  was  a  mere  shell, 
and  it  was  doubtful  whether  it  ever  had  the  right  to 
pay  a  dividend  after  taking  the  State  charter.  In 
April,  1840,  the  stock  was  at  78,  and  the  Bank  is 
reported  to  have  had  lobbyists  at  the  Legislature 
to  prevent  an  act  making  resumption  of  specie 
payments  mandatory.  A  bill  was  passed  for  resump- 
tion two  years  later,  and  subsequently  an  investi- 
gating committee  said  the  lobbyists  had  duped  the 
Bank  and  extorted  money  from  it,  but  had  never 


194  THE  STORY  OF  A  BANK 

paid  out  any  of  it  to  legislators.  But  other  evidence 
showed  flagitious  intrigue  and  corruption.  It  was 
shown  that  the  amount  drawn  from  the  Bank  for 
that  purpose  was  $131,175.  It  now  became  in- 
volved in  the  political  intrigue  of  the  State,  the 
Bank  party  trying  to  give  the  control  to  Van  Buren. 

The  stockholders  of  the  Bank  gave  out  a  report, 
January  4,  1841,  showing  a  list  of  the  securities  it 
held,  and  which  were  shown  to  be  among  the  poorest 
on  the  market.  Experts  estimated  the  loss  at  the 
then  market  price  at  $17,300,000.  The  stock 
immediately  fell  $17  a  share.  On  the  15th,  however, 
the  Bank  resumed  specie  payments,  as  did  all  other 
Philadelphia  banks,  and  in  the  next  three  weeks  it 
paid  out  $6,000,000.  Then  it  failed  again,  February 
4.  The  deposits  were  then  stated  at  $2,200,000, 
notes  outstanding  $2,800,000,  not  including  some 
$600,000  of  the  old  Bank,  supposed  to  be  lost.  On 
this  failure  the  stock  fell  $30  a  share.  The  Bank 
had  eight  agencies  outside  of  Pennsylvania  and  three 
offices  in  the  State.  At  this  time  the  stockholders 
in  Pennsylvania  numbered  1481,  in  the  United 
States  outside  of  Pennsylvania,  1658,  there  being 
1,390  foreign  holders.  Out  of  the  $35,000,000 
capital,  $27,000,000  had  gone  into  foreign  hands, 
while  $6,000,000  was  held  in  New  York  and  $2,000,- 
000  in  Philadelphia.  It  was  remarked  that  a  very 
large  amount  was  held  in  the  islands  of  Guernsey 
and  Jersey. 

These  were  years  of  financial  demoralization,  in 


THE  STORY  OF  A  BANK  195 

which  legislative  regulation  of  banks  had  but  slight 
effect  in  maintaining  security.  In  1836,  the  New 
York  Legislature  hastened  to  suspend  the  Safety 
Fund  act,  under  which  any  bank  which  refused  to 
redeem  its  notes  on  demand  was  to  be  enjoined  by 
the  Chancellor,  placed  in  the  hands  of  a  receiver, 
and  its  charter  forfeited.  It  may  be  noted  in  pass- 
ing that  this  system  of  Safety  Fund  banks,  by  which 
a  fund  was  provided  by  taxation,  or  subscriptions, 
has  been  referred  to  during  the  last  few  years  in 
support  of  the  scheme  of  bank  guaranty  under 
state  laws.  A  large  majority  of  the  banks  in  the 
State  of  New  York  were  in  the  system,  and  the 
measure  of  its  success  appears  from  the  fact  that  in 
1845  the  State  issued  bonds  to  pay  the  creditors  of 
Safety  Fund  banks  that  had  failed,  in  order  to  relieve 
the  system  of  the  odium  of  bankruptcy  under  which 
it  had  suffered  since  1842,  the  sound  banks  having 
been  great  losers  through  the  operations  of  reckless 
or  dishonest  ones.  It  should  be  said,  however,  that 
the  plan  worked  safely  for  several  years  after  it  was 
started  in  1829. 

The  prostrate  Bank  now  addressed  a  memorial 
to  the  Pennsylvania  legislature,  which  was  consider- 
ing a  measure  repealing  the  penalties  for  suspension 
of  specie  payments.  The  memorial  recited  that 
the  Bank  had  paid  the  State  $3,022,662,  and  sub- 
scribed $415,000  to  railroad  construction,  and  had 
loaned  the  State  during  the  five  years  of  depression 
$8,620,000.  It  does  not  appear  that  there  were 


196  THE  STORY  OF  A  BANK 

losses  from  these  loans,  but  the  amounts  paid  in 
bonuses  undoubtedly  were  more  than  conditions 
justly  warranted.  The  act  noted  was  passed  in 
March,  1841,  over  a  veto. 

At  a  meeting  of  directors,  April  17,  1841,  it  was 
voted  to  accept  the  relief  bill,  to  reduce  capital,  and 
to  change  the  name  of  the  Bank.  But  there  was  no 
salvation  for  the  concern.  A  committee  of  investi- 
gation reported  that  the  capital  was  sunk  in  bad 
debts  and  in  stocks  which  at  the  most  favorable 
view  could  not  be  realized  from  for  a  long  time.  On 
the  estimate  of  the  committee,  the  assets  amounted 
to  $14,800,000  with  which  to  meet  $32,500,000  of 
capital,  the  Bank  owning  a  part  of  its  own  shares. 
The  debt  in  Europe  exceeded  the  quick  bills  receiv- 
able here,  and  it  was  shown  that  during  operation 
under  State  charter,  the  Bank  had  taken  $31,000,000 
in  stocks,  etc.,  in  settlement  of  loans.  There  had 
been  a  heavy  loss  from  the  cotton  deals  left  by 
Biddle,  one-half  of  which  he  settled,  with  interest, 
by  giving  Texas  bonds  for  two-thirds,  and  promis- 
ing such  bonds  for  the  remainder.  It  is  said  that 
the  accounts  were  in  such  condition  that  the  actual 
truth  about  the  cotton  profits  and  losses  never  was 
disclosed.  The  other  half  of  the  ascertained  amount 
of  losses  was  paid  by  Cowperthwait,  the  succeeding 
president,  and  Wilder,  a  director,  one-fourth  each. 
The  outstanding  shares  were  then  estimated  to  have 
a  book  value  of  $46.94  each. 

Then  arose  a  controversy  between  the  investigat- 


THE  STORY  OF  A  BANK  197 

ing  committee  and  Biddle,  who  was  severely  criti- 
cised by  it.  He  replied  in  a  published  report,  stat- 
ing that  its  animus  grew  out  of  the  fact  that  the 
Bank  had  supported  the  Reading  railroad,  while 
members  of  the  committee  were  interested  in  a 
rival  line.  He  denied  that  the  Bank  ever  owned  a 
bale  of  cotton,  and  defended  his  connection  with  the 
cotton  operations,  claiming  they  had  helped  pay 
the  debts  of  the  American  people,  by  making  a 
market,  had  corrected  the  exchanges,  had  even 
saved  the  Bank,  and  enabled  him  to  "save"  New 
York.  He  asserted  that  his  personal  estate  had 
been  sacrificed  in  the  interest  of  the  Bank,  and  still 
declared  that  it  was  sound  when  he  withdrew  from 
it.  He  continued  to  write  in  his  own  self-defense, 
but  the  public  no  longer  placed  much  confidence  in 
his  words.  Good  authorities  agree  that  in  his 
articles  and  letters,  written  subsequent  to  1836, 
there  is  evidence  of  insincerity.  Gallatin  claimed 
the  Bank  had  since  1837  been  the  cause  of  delays  in 
resumption  and,  further,  that  "in  every  respect  it 
has  been  a  public  nuisance."  "The  mismanage- 
ment and  gross  neglect  which  could  in  a  few  years 
devour  two-thirds  of  a  capital  of  $35,000,000  are 
incomprehensible,  and  have  no  parallel  in  the 
history  of  banking. " 

But  it  is  not  so  wonderful  when  the  conditions  of 
those  years  from  1836  to  1841  inclusive  are  con- 
sidered. The  panic  of  the  first  part  of  this  period  is 
well  known,  but  it  is  not  so  generally  understood 


198  THE  STORY  OF  A  BANK 

that  it  continued  practically  for  five  years.  Local 
banks  with  a  combined  capital  of  $70,000,000  failed 
in  1841,  and  the  number  of  defalcations  and  embez- 
zlements was  astonishing.  Only  in  two  or  three 
cases,  it  is  said,  were  the  offenders  punished  by  law, 
and  it  became  sadly  apparent  that  such  commercial 
irregularities  could  not  be  reached  by  legal  process. 
Commercial  integrity  was  debauched  by  the  methods 
in  vogue.  Banks  especially  seemed  to  be  superior 
to  the  law. 

There  was  even  now  a  lingering  hope  that  the 
Bank  could  revive,  but  as  suits  against  it  multiplied, 
it  was  abandoned.  Over  100  judgments  were 
rendered  against  it  from  $100  to  $100,000.  Its 
liquidation  was  under  the  most  adverse  conditions, 
and  there  was  dissatisfaction  on  the  part  of  every- 
body interested.  An  assignment  was  made  of 
certain  assets  to  cover  certain  liabilities;  at  New 
Orleans  the  Government  levied  on  the  assets  to 
recover  on  the  dividend  held  out  in  the  French  draft 
case;  the  court  sustained  the  assignment  and  cut  off 
the  claim.  Assignments  and  litigation  were  the 
funeral  rites,  and  they  were  prolonged.  In  1851,  a 
Dutch  stockholder  started  after  the  fragmentary 
remains  for  residuary  interests,  and  the  stock  again 
took  an  upturn,  from  nothing  to  $2  a  share;  but  a 
decision  that  the  Bank  was  liable  for  the  bonus  to 
the  State  for  the  term  of  its  charter,  nipped  the 
boom.  After  that  decision  the  holders  applied  for 
an  act  to  wind  up,  and  appointed  five  trustees,  to 


THE  STORY  OF  A  BANK  199 

whom  a  general  assignment  was  made.  A  distri- 
bution was  made  in  1853.  An  act  of  February, 
1855,  gave  claimants  authority  to  divide  the  leav- 
ings under  the  third  trust,  and  in  August  the  final 
dividend  was  advertised. 

It  appears  that  the  notes  and  deposits  were  all 
paid.  Other  domestic  creditors  got  about  80  per 
cent,  Sumner  thinks.  The  stockholders  realized 
nothing. 

Biddle  was  brought  to  trial  after  the  failure  of 
the  Bank,  for  mismanagement,  and  acquitted.  He 
died  February  27,  1844,  aged  58,  broken  in  spirit 
and  fortune,  vilified  by  those  who  flattered  and 
sponged  off  of  his  generosity  in  the  days  of  his  power. 
Brilliant,  generous,  and  resourceful,  he  was  "led 
astray  by  prosperity." 


The  real  value  of  this  story  is  in  its  illustration 
of  the  folly  and  danger  of  admitting  that  intricate 
financial  and  economic  problems  are  matters  about 
which  popular  opinion  may  safely  be  consulted. 
If  partisanship  or  traditional  preferences  enter  into 
their  consideration,  appeal  is  at  once  made  for  the 
popular  support,  with  a  corresponding  effort  to 
influence  the  public  mind  or  to  trim  in  accordance 
with  what  appears  to  be  the  popular  feeling. 

The  consultation  of  the  sentiment  of  the  masses  on 
so  technical  a  subject  as  that  of  a  currency  system, 


200  THE  STORY  OF  A  BANK 

falsely  implies  that  they  have  the  training  necessary 
to  an  intelligent  judgment  of  it.  Common  sense 
might,  of  course,  go  far  to  offset  that  lack,  if  the 
people  were  left  free  of  ulterior  influences  that,  when 
great  issues  are  up,  too  often  seek  to  arouse  their 
suspicions  and  becloud  their  comprehension.  Cita- 
tions of  instances  in  which  confusion  of  the  public 
thought  have  worked  disastrously  are  needless  after 
the  recital  of  the  Bank  case.  However,  no  subject 
of  legislation  affords  so  many  examples  of  the  harm- 
ful influence  of  popular  error  as  public  finance,  con- 
sidered in  its  broadest  scope.  The  tax  systems  in 
operation  in  most  of  the  States  are  for  the  most 
part  ridiculed  by  intelligent  students  as  embodi- 
ments of  ancient  error.  Their  inefficiency  is  pointed 
out,  their  results  of  inequality  and  evil  effects  on 
morals,  with  the  further  fact  that  their  main  prin- 
ciples have  been  discarded  in  other  countries;  yet 
it  is  found  next  to  impossible  to  secure  real  reform 
because  of  the  ignorance  of  the  great  majority  on 
the  subject,  coupled  with  prejudice  in  favor  of 
traditional  ideas.  The  late  David  A.  Wells  showed 
what  tremendous  losses  the  Government  suffered 
during  the  Civil  War  period  through  mistakes  in 
internal  revenue  legislation,  the  result  of  Congress 
ignoring  the  urgent  advices  of  the  Revenue  Com- 
mission (which  it  was  compelled  afterward  to  accept) 
and  listening  to  uninformed  opinions  conforming 
more  to  sentiment;  and  which  "viewed  from  the 
standpoint  of  finance,  economics,  and  morals,  COR-. 


THE  STORY  OF  A  BANK  201 

stitute  one  of  the  most  interesting,  instructive,  and 
disgraceful  chapters  in  its  history. " 

These  facts  are  not  to  be  construed  as  any  dis- 
paragement of  popular  government  any  more  than 
should  the  fact  that  the  Government  employs 
scientists — persons  of  particular  qualifications — in 
other  matters  depending  on  its  authority,  such  as 
sanitation,  coast  defenses,  etc.,  instead  of  submitting 
the  problems  to  popular  decision.  The  evils  of  the 
Bank  war  is  primarily  attributable  to  a  political 
system  that  cultivated  class  prejudices.  It  appealed 
to  the  ignorant,  fear  or  envy  of  wealth,  and  inspired  a 
hatred  of  moneyed  institutions.  It  is  made  clear 
by  the  facts  given  that  collectively  the  people,  with 
their  perverted  notions  about  the  functions  of  banks, 
and  of  what  should  be  expected  of  them,  were  incom- 
petent to  pass  upon  the  merits  or  demerits  of  the 
United  States  Bank.  The  tendency  was  constantly 
to  disqualify  them  for  so  doing.  It  was  the  scheme 
of  demagogism  to  appeal  to  their  passions,  and  to 
cajole  them  by  false  alarms  into  supporting  the 
most  irrational  theories. 

As  for  Andrew  Jackson,  there  is  no  intent  here  of 
undue  reprehension,  nor  is  it  in  order  to  consider 
his  qualities  and  achievements  aside  from  his  rela- 
tion to  this  subject;  yet  one  is  fully  warranted  by 
the  evidence  in  saying  that  no  man  of  America  who 
has  left  as  large  footprints  on  its  historical  sands 
had  more  selfish  political  ideas.  He  was  a  perfect 
autocrat  professing  democracy,  his  administration 


202  THE  STORY  OF  A  BANK 

being  the  most  striking  example  we  have  had  of 
arbitrary,  one-man  power.  It  has  been  observed 
that  the  example  of  his  turbulent  nature  left  its 
effects  on  the  nation.  The  era  of  his  presidency  was 
marked  by  unusual  violence.  It  was  the  heyday  of 
unrestraint,  of  riots,  burnings,  mobbings.  Public 
service  was  debauched,  and  for  the  first  time  seized 
upon  for  political  patronage.  The  course  of  the 
administration,  which,  as  Schouler  says,  was  wilful 
beyond  all  others  in  our  annals,  set  scant  example 
of  disinterested  patriotism  or  ideal  citizenship.  Its 
influences  were  fraught  with  evil  that  penetrated 
deeper  into  our  civic  life,  and  has  proved  more  perma- 
nent, than  those  of  any  other.  These  most  serious 
facts  are  pertinent  to  a  judicial  consideration  of  the 
calamity  wrought  by  the  destruction  of  the  Bank  of 
the  United  States. 

The  most  disinterested  authorities  have  not  found 
in  the  allegations  and  charges  made  against  the 
Bank,  nor  in  the  testimony  which  was  alleged  to 
support  them,  any  convincing  evidence  that  the 
attack  was  made  from  pure  motives.  We  have  seen 
sufficient  proofs  of  a  deliberately  formed  conspiracy 
to  make  of  the  Bank  an  ally  of  the  Jackson  party, 
or  to  ruin  it.  The  plotters  were  the  closest  friends 
and  political  advisers  of  Jackson,  several  of  them 
men  of  notoriously  rabid  dispositions,  and  moved 
by  personal  animosities.  They  understood  his  im- 
placable nature  and  his  prejudices.  They  also 
understood  the  temper  of  the  people  and  the  senti- 


THE  STORY  OF  A  BANK  203 

ments  that  could  most  easily  sway  them.  Indeed 
it  was  not  difficult  to  make  it  appear  as  a  people's 
cause.  Without  the  credulity,  the  rural  and  section- 
al prejudices  of  the  people,  the  undertaking  could 
not  have  succeeded.  Jackson  based  his  main  justi- 
fication for  seeking  to  destroy  the  Bank  on  the 
ground  that  the  people  wanted  it  done;  that  they 
knew  what  a  harmful  and  dangerous  monster  it  was. 
Yet  from  the  time  of  its  resuscitation  after  its  politi- 
cal maiming  in  1818-19  to  the  advent  of  Jackson, 
the  people  had  enjoyed  a  safer  banking  system,  a 
safer  currency,  and  greater  facilities  of  exchange 
than  for  years  before.  They  had  suffered  no  panics, 
the  incipient  one  of  1825  having  been  suppressed  by 
the  action  of  the  Bank.  They  had  experienced  a 
period  of  unusual  prosperity.  There  had  come  to 
be  less  fear  of  monopolistic  power.  Political  opposi- 
tion to  the  Bank  had  practically  died  out.  The 
public  finances  were  in  excellent  order,  the  debt 
being  rapidly  reduced,  and  the  operations  of  the 
Treasury  were  carried  on  with  convenience  and 
unquestioned  safety.  The  people  were  not  com- 
plaining. It  was  only  after  Jackson  began  telling 
them  that  they  were  being  robbed  by  foreign  capital- 
ists, that  they  were  menaced  by  a  monster  of  iniquity, 
that  their  liberties  were  threatened  by  a  tyrant 
monopoly  that  was  seeking  to  overturn  the  demo- 
cratic Government, — it  was  only  after  he  and  his 
scullion  abettors,  subordinating  principle  and  patriot- 
ism to  a  nefarious  design,  had  poisoned  their  minds, 


204  THE  STORY  OF  A  BANK 

reanimated  their  old  passions,  and  revived  their 
waning  envy,  that  they  began  to  cry  vengeance 
against  the  Bank.  They  followed  the  cry;  Jackson 
sounded  it. 

When  the  harm  was  done,  and  the  people  suffered 
for  it,  he  beguiled  them  for  a  time  into  attributing 
it  to  the  Bank,  but  soon  many  of  them  saw  through 
the  fog  of  mendacity.  He  left  the  presidency  with 
a  blight  on  his  popularity,  and  never  regained  his 
former  prestige,  even  with  the  people  of  his  own 
State.  He  did  not  entirely  escape  retribution  for 
his  offense. 

That  the  destruction  of  the  Bank  was  a  political 
crime  has  been  conceded  by  the  clearest  thinkers  in 
America  and  abroad.  While  party  fealty  here  has 
caused  some  difference  of  feeling  on  the  matter, 
holding  those  subject  to  certain  traditions  to  main- 
tain that  Jackson's  action  was  warranted,  there  has 
been  little  or  none  abroad.  Economists  and  histori- 
cal writers  of  Europe,  both  at  the  period  and 
since,  have  scathingly  denounced  Jackson's  course. 
Tocqueville,  who  was  in  this  country  at  the  time, 
saw  danger  in  the  precedent.  "They  aroused  the 
local  passions  of  the  blind  democratic  instinct  of 
the  country  to  aid  their  cause;  and  asserted  that 
the  Bank  directors  formed  a  permanent  aristocratic 
body  whose  influence  would  ultimately  . 
affect  those  principles  of  equality  upon  which  society 
rests  in  America."  And  Tocqueville  was  a  friend 
of  our  democracy. 


THE  STORY  OF  A  BANK  205 

Partisanship  is  not  as  bigoted  now  as  in  those 
days,  nor  are  the  people  as  hysterical  over  appari- 
tions produced  to  order  in  political  seances;  but 
popular  opinion  is  still  easily  affected,  the  average 
popular  mind  is  not  yet  trained  in  the  science  of 
finance  and  economy,  and  the  nation  has  given 
evidence  in  very  recent  years  that  multitudes  may  be 
misguided  on  those  subjects.  They  discover  the 
deception  in  time,  but  not  always  before  great  harm 
results.  Any  effort  to  dictate  what  change  shall  be 
made  in  our  currency  and  banking  system  by  appeal- 
ing to  all  predilections,  or  any  attempt  to  influence 
the  decision  of  those  who  by  position  and  earnest 
study  of  the  subject  may  fairly  be  adjudged  best 
qualified  to  determine,  by  declaring  any  particular 
plan  is  or  is  not  in  harmony  with  popular  or  sectional 
sentiment,  will  be  merely  to  repeat  the  follies  that 
have  been  so  disastrous  in  the  past. 

As  to  the  nature  of  the  Bank,  and  the  system  under 
which  it  operated,  there  may  be  more  room  for  diver- 
sity of  opinion  concerning  its  adaptation  to  present 
conditions,  or  whether  it  was  the  best  that  could  have 
been  devised  in  its  time.  It  seems  that  some  writers 
have  had  their  doubts.  Sumner  sees  no  reason  why 
the  Government  should  have  become  a  shareholder 
in  it,  and  thinks  adequate  national  supervision, 
with  less  cause  for  Governmental  interference,  could 
have  been  maintained  without  it.  Admitting  some 
force  in  the  opinion,  it  is  not  likely  that  even  if  the 
Government  had  not  been  implicated  as  a  partner 


206  THE  STORY  OF  A  BANK 

in  the  exercise  of  tyranny  over  the  people  it  would 
have  escaped  Jackson's  designs.  Others,  while 
arraigning  his  motives,  seem  to  condone  somewhat 
the  destruction  of  the  institution,  simply  because  it 
provoked  political  cupidity,  and  was  a  standing 
temptation  to  its  advances.  But  this  certainly  is 
more  of  a  reflection  on  our  political  morals  than  on 
the  propriety  of  the  banking  system.  Catterall 
believed  it  was  the  most  logical  system  we  have 
ever  constructed  and  that  a  bank  performing  similar 
services  today,  and  similarly  organized,  would  be 
far  more  valuable  than  then.  His  estimate  of  its 
merits  and  the  loss  in  its  destruction  furnish 
further  material  for  thought: 

"Up  to  the  period  of  the  Bank  war,  the  connection 
between  the  Bank  and  the  Government  was  an 
immense  benefit  to  both,  but  particularly  to  the 
Government.  But  having  stated  this  conclusion, 
there  is  a  corollary  which  is  just  as  inevitable.  With 
the  growth  of  the  Union,  with  the  increase  of  national 
wealth  and  population,  the  Bank  would  have  been 
progressively  useful.  From  this  point  of  view  it 
becomes  obvious  that  Jackson  and  his  supporters 
committed  an  offense  against  the  nation  when  he 
destroyed  the  Bank.  The  magnitude  and  enormity 
of  that  offense  can  only  be  faintly  realized,  but  one 
is  certainly  justified  in  saying  that  few  greater 
enormities  are  chargeable  to  politicians  than  the 
destruction  of  the  Bank  of  the  United  States.  It 
was  the  overthrow  of  a  machine  capable  of  incalcul- 


THE  STORY  OF  A  BANK  207 

able  service  to  this  country — a  service  which  can 
be  rendered  by  no  bank  not  similarly  organized. 

It  will  have  to  be  acknowledged  that  the 
old  Bank,  in  its  services  to  the  Government,  was 
far  superior  to  any  other  banking  system  known  in 
this  country. "  (p.  476) 

Whether  this  be  conceded  in  its  entirety,  it  em- 
phasizes the  conclusions  herein  drawn  from  the 
Story  of  the  Bank,  and  adds  its  own  note  to  the 
warning  against  empiricism. 


INDEX 


Adams,  J.  Q.,  120,  155. 

' '  Aurora , ' '  opposed  to 
recharter,  30. 

Baltimore  branch,  frauds 
of,  55. 

"Bank  War,"  beginning 
of,  94-100. 

B  a  n  k  e  r  s'  Convention, 
Phila.,  48. 

Bankruptcy,  first  efforts 
for  uniform  system  of, 
85. 

Banks,  State,  taking  gov- 
ernment deposits,  177; 
fail  as  government  de- 
positories, 188. 

Barbour,  P.  P.,  resolu- 
tion of,  92. 

Bennett,  James  Gordon, 
139. 

Benton,  Thomas  H.,  90, 
117,  154,  155;  bullion 
plan  of,  165. 

Biddle,  Nicholas,  govern- 
ment director,  presi- 
dent of  Bank,  80,  81; 
ability  shown,  86;  cor- 
respondence with  Ing- 
ham,  95  et  seq.  Pow- 


er of,  127;  goes  to 
Washington,  128;  re- 
signs presidency,  192; 
settles  cotton  losses, 
196.  Trial,  acquittal 
and  death,  199. 

Biddle,  Thomas,  122, 
126. 

Binney,  Horace,  85,  115, 
149. 

Blair,  F.  P.,  90,  91,  101. 

Bronson,  Isaac,  expert 
opinion  sought,  141. 

Cabinet,  opinions  of,  as 
to  removal  of  deposits, 
142. 

Calhoun,  John  C.,  sug- 
gestion of,  for  Bank 
under  D.  C.  charter, 
40;  reports  bill  for 
Second  Bank,  42. 

Campbell,  George,  38. 

Carey,  Mathew,  37. 

Cass,  Lewis,  113,  142. 

Caterall,  Prof.,  quoted, 
138;  summary  of,  206. 

Cheves,  Langdon,  41 ; 
president  of  Bank,  57; 
report  of,  58;  retires,  80. 


209 


210 


INDEX 


Class  warfare,  beginning 
of,  24. 

Clay,  Henry,  115,  116; 
severe  arraignment  of 
Jackson's  policy,  170. 

Clayton,  of  Georgia,  119. 

Clinton,  George,  35. 

Confederation,  financial 
chaos  under,  21. 

Congress,  wrangles  over 
Bank  plans,  24;  dis- 
regards subject  of 
sound  finance,  62; 
seething  session  of  '33- 
'34,  153. 

Congressmen,  loans  to, 
140. 

Crawford,  Wm.  H.,  47, 
48. 

Dallas,  A.  J.,  38,  bank 
plans  of,  41,  42,  47. 

Deposits,  removal  of,  141 
et  seq.;  distribution 
among  states  on  basis 
of  representation  in 
Electoral  College,  173. 

Desha,  of  Kentucky, 
demagogic  utterances 
of,  34. 

Drafts,  private,  trouble- 
some use  of,  84 ;  legali- 
ty of,  85. 

Duane,  Wm.  J.,  Secre- 
tary of  Treasury,  143, 
defies  Jackson  on  de- 
posit removal  and  dis- 
missed, 144. 


Duane,  Wm.,  30. 

Federalists,  28,  37,  op- 
pose new  Bank,  43. 

Fisher,  James  C.,  57. 

Fisk,  Congressman,  33, 
35. 

First  Bank,  chartered, 
26;  liquidated,  32. 

Forsyth  resolution,  51. 

French  spoliation  draft 
protested,  145;  litiga- 
tion over,  146. 

Gains  to  government  of 
First  Bank,  34;  of 
Second  Bank,  180. 

Gallatin,  Albert,  29,  30, 
38,  127,  197. 

Girard,  Stephen,  large 
subscription  of,  46; 
presides,  115. 

Grundy,  Felix,  resolution 
of,  41. 

Hamilton,  Alexander,  22, 
23,  27. 

Hamilton,  J.  A.,  142. 

Hill,  Isaac,  96,  148. 

Illinois,  a  bank  of,  74. 

Ingham,  Samuel  D.,  plot- 
ter against  Bank,  94; 
bad  faith  of,  97-99. 

Jackson,  Andrew,  attacks 
Bank,  100;  confused 
ideas,  101;  second  at- 
tack in  Message  of 
1830,  110;  vetoes  re- 
newal charter,  132; 
falsity  of  his  "reasons" 


INDEX 


211 


132;  over-rides  Su- 
preme Court,  133,  153, 
rails  at  Senate;  cen- 
sured by  Senate,  154; 
queer  bank  ideas  of, 
167. 

Jefferson,  Thomas,  111. 

Johnson,  R.  M.,  92,  119. 

Jones,  Wm.,  38;  presi- 
dent Second  Bank,  45. 

Kendall,  Amos,  in  Ken- 
tucky, 77;  fourth  audi- 
tor Treasury,  90;  his 
charges  disproved,  91, 
111,  148,  151,  166. 

Kentucky,  popular  bank- 
ing in,  72;  bank 
relief  laws  of,  76;  old 
court  and  new  court 
parties,  77.  Bank  of 
the  Commonwealth  of, 
72. 

"Kitchen  Cabinet,"  101 

Knox,  John  J.,  history, 
quoted,  93,  99,  181, 
187. 

Kuhn's,  Charles,  attempt 
to  force  forfeiture  of 
Bank's  charter,  191. 

Land-speculating  bank, 
22. 

Loco  focos,  rise  and  va- 
garies of,  190. 

Losses,  First  Bank,  32; 
Second  Bank,  60;  by 
State  banks,  182. 


McDuffie  committee, 
102;  report  of,  102  et 
seq. 

McLane,  Louis,  Secre- 
tary of  Treasury,  ap- 
proves Bank,  114;  re- 
fuses to  remove  de- 
posits, 142. 

McLean,  John,  82;  P.M. 
General,  92. 

Madison,  James,  25. 

Mason,  Jeremiah,  94. 

Maryland,  attempts  to 
tax  Bank,  67. 

Money  power,  dread  of, 
201. 

Monopoly  charge  ex- 
posed, 137,  177,  183- 
184. 

Morris,  Robert,  22. 

Morris,    Governeur,    22. 

National  Republicans, 
115,  116,  141. 

Newspapers,  loans  to, 
122. 

Niles'  Register,  65;  ac- 
count of  counterfeiters, 
69,  131,  184. 

Ohio,  attempts  to  tax 
Bank,  67;  makes  raid 
on,  67. 

Panics,  commercial,  that 
of  1819,  79;  of  1825, 
83;  of  1833,  34,  162 
et  seq.;  of  1837,  186. 

Pension  funds,  attempt- 


212 


INDEX 


ed  illegal  removal  of 
97;  second  do,  113. 

Polk,  James  K.,  quoted, 
90;  minority  report  of, 
137. 

Popular  prejudice  vs. 
banks,  72,  73;  danger 
of  appealing  to,  109. 

Portsmouth  branch 
troubles,  94  et  seq. 

"Race-horse"  bills,  137. 

Relief  measures,  76. 

Safety  Fund  Banks,  fail- 
ure of,  195. 

Schouler,  James,  banks 
quoted,  130;  quoted, 
147;  on  losses  by  State, 
160. 

Second  Bank  of  the  U. 
S.,  chartered,  43;  scut- 
tled by  politicians,  50, 
54;  losses,  60;  wreckers 
acquitted,  66;  Biddle, 
president,  81 ;  state- 
ment, 82,  do,  115;  in- 
volved in  political  cam- 
paign, 116;  renewal  of 
charter  to  Congress, 
118;  investigation,  119; 
frivolous  nature  of 
charges,  120  et  seq. 
Renewal  charter  pass- 
ed, 131;  vetoed,  132; 
answers  Jackson's  de- 
famations, 152;  senate 
investigation,  156;  Ty- 


ler's report;  takes  char- 
ter from  Pennsylvania, 
174;government  shares 
liquidated,  176;  fails, 
193;  capital  exhausted, 
196. 

Sectional  antagonisms 
over  Bank  question, 
25. 

Smith,  Senator,  report  of, 
109. 

Smith  &  Buchanan,  fail- 
ed, 79. 

Specie  circular,  189. 

Spencer,  John  C.,  52; 
committee  of,  53;  re- 
port, 59. 

Sumner,  Wm.  Graham, 
quoted,  36,  39,  48,  70, 
99,  101,  109,  133,  135. 

Supreme  Court  of  U.  S. 
sustains  constitution- 
ally of  Bank,  78,  106. 

Taney,  Roger  B.,  favors 
removal  of  deposits, 
142;  Secretary  of 
Treasury  orders  re- 
moval of  government 
deposits  from  Bank, 
146;  duplicity  of, 
toward  Bank,  150;  fool- 
ish advice  to  banks ,  1 85 . 

Tariff,  change  in  system 
of  paying  duties,  168. 

Tocqueville,  Alexis  de, 
quoted,  204. 


INDEX 


213 


Toland  Henry,  expert 
opinion  of,  136. 

Tyler,  John,  heads  Sen- 
ate investigating  com- 
mittee, 157. 

Verplanck's  report,  137. 

Wayne,  of  Georgia,  113. 

Ways  and  Means  Com- 
mittee report,  137. 


Webster,  Daniel,  43, 140; 

proposes  new  charter 

bill,  167. 
Whitney,    Reuben,    122, 

148;  exposed,  151. 
Woodbury,  Isaac,  94-111, 

142,  169. 


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